The Eastern Cape is hoping to get a share of Saudi Arabia’s $10bn (R137.8bn) investment into the SA economy to build the on-again, off-again oil refinery at Coega.
But it all depends on whether Nelson Mandela Bay will be the chosen site for the multibillion-rand project, as Richards Bay is also in the running.
Project Mthombo, PetroSA’s 360,000-barrel-a-day refinery, has been mooted for Coega’s industrial development zone since 2008.
The proposal has hit repeated snags over the years, eventually missing its 2014 commissioning date.
Finance MEC Oscar Mabuyane said a lot of money had been invested in feasibility studies at Coega for the project.
“We are not prepared to lose it,” he said.
The refinery investment comes as energy minister Jeff Radebe met with his Saudi Arabian counterpart, Khalid Al Falih, on January 18 in Pretoria.
The purpose of the meeting was to follow up on progress made since the state visit of President Cyril Ramaphosa to Saudi Arabia in July 2018.
During his visit, Saudi Arabia pledged to invest $10bn in the SA economy.
Energy department spokesperson Johannes Mokobane declined to reveal any details on where the refinery would be located.
“The two ministers discussed the modalities for the proposed investment by Saudi Arabia in a new crude oil refinery and petrochemical plant in South Africa,” he said.
Mokobane said the investment in the SA energy sector was at the centre of the pledge by Saudi Arabia.
Also at the meeting were officials from Saudi Arabia’s national oil company, Saudi Aramco – one of the largest companies in the world by revenue, and according to accounts seen by Bloomberg News, the most profitable.
A prominent criticism of building a refinery at Coega is that it is too far from Transnet’s pipeline, which moves fuel from Durban to Gauteng.
Transnet’s long-term planning framework looked at a proposed pipeline for Mthombo years ago.
However, it found it would have implications for the Durban pipeline, which would, for a time, be underused and so pipeline tariffs (paid by the consumer) would increase.
Mabuyane said a debate was needed about the pipeline, but the investment from Saudi Arabia would cover its costs.
“The money is enough to create that infrastructure between Johannesburg and Port Elizabeth.
“Coega is centrally located to be able to support both the eastern and western corridor,
The refinery could create more than 27,000 direct and indirect jobs at the height of its construction phases
as well as some supplies to Gauteng,” he said.
“The refinery will therefore supply the coastal ports around the Cape corridor, and supply the excess volumes to Gauteng.”
He said a decision on the exact site would be made within the next 30 days.
“It will have huge benefits for the province . . . It will increase the economy on a large scale.”
The estimated cost to build the refinery is $10bn.
On the proposed ownership percentages, Mabuyane said: “This is a negotiated process which will be concluded when the preferred partner is engaged with.
“This would be the biggest investment at Coega and the province and would advance a new industry which is not currently well developed.
“The refinery will substitute the current and mid-term future imports, and if there is an excess of refined products, this will be exported.
“It should be appreciated that Africa has limited refining capacity, and most of its crude is exported to outside of Africa and imported back as refined products.
“A refinery in Coega will thus be able to treat some of this African crude.”
Coega Development Corporation spokesperson Ayanda Vilakazi said it had already done extensive groundwork to find a suitable location for the refinery, “but due to confidentiality issues we are not at liberty to reveal details [now].”
He said the refinery could create more than 27,000 direct and indirect jobs at the height of its construction phases.