Future of refineries hangs in balance

Billions of rands needed for upgrades to meet regulations – but funding doubtful

Thousands of jobs in the oil-refinery industry face being wiped out as multibillion-rand up grades are required– but getting such private backing is unlikely, SA Petroleum Industry Association(Sapia) chairman Maurice Radebe has warned.

Sapia members – including BP, Chevron, Engen, Total, Sasol and Shell – contribute 5% to GDP and employ nearly 9 000people directly, with a further 70 000 in retail.

SA has six refineries, the majority of which were built in the1950s and face the prospect of paying billions for upgrades to meet the government’s proposed Cleaner Fuels II strategy.

The investment is required for the strategy’s introduction.

However, “there is no shareholder on the earth who will commit that money with no return ”, Radebe says.

“We cannot do it without[government] support.

If we do not support this industry, in five to 10 years’ time it will be wiped out.”

And Alan Gelder, of UK-based Wood Mackenzie’s refining and marketing research team, said South African refineries could face closure even sooner, possibly as early as 2020.

Chevronhas already embarked on at h re e -year divestment programme, which started in 2014.

It entails the potential $1-billion(R14.4-billion) sale of its75% stake in Caltex and its refinery in Cape Town.

Should Chevron fail to find a buyer, its refinery could be the first to close.

Sapia executive director Avhapfani Tshifularo warned that such a scenario could create a “house of cards” because it would directly affect other industries, including chemicals and plastics.

“Investments require regulatory certainty,”Gelder said.

When the new fuel strategy was unveiled, the industry had mobilised engineering teams and resources for its implementation, Radebe said.

The delays have resulted in these teams being disbanded, leaving the industry and the government at a stalemate.

The new strategy was expected to be implemented in2017, but has now been put back to beyond 2020.

The National DevelopmentPlan requires a decision on local refineries by next year.

A senior Department of Energy  official said deadlines would be met. – BDLive