South Africa’s biggest fuel refinery is shutting down – and government is now looking to nationalise it

 ·24 Feb 2022

KwaZulu-Natal premier Sihle Zikalala says the province has begun talks with petroleum companies BP and Shell and the national government to purchase South African Petroleum Refineries (Sapref).

Presenting his state of the province address on Thursday (24 February), Zikalala said he began consultations with the Department of Mineral Resources and Energy to work towards taking over the full operations of Sapref as a state-owned oil company.

This comes after BP and Shell announced they will pause operations in Durban by the end of March 2022 as they attempt to find a buyer. Engen recently announced a similar decision around its refinery operations, said Zikalala.

“We are of the firm view that retaining refinery operations in the province is key for economic growth and job creation rather than solely on importing refined oil. For that reason, we have called on the national government to buy Sapref not only to protect jobs but to build the capacity of the state.

“It cannot be that the country will remain dependent on foreign-owned, private conglomerates who are only driven by the profit motive and owe no loyalty to our developmental agenda.”

According to Shell Downstream South Africa country chair Hloniphizwe Mtolo, the decision to pause the refinery was difficult for both shareholders. The companies said they would use other existing assets and trading arrangements to ensure the ongoing security of fuel supply to the country and consumers.

“Shell remains committed to the security of supply to our customers over this production pause,” Mtolo stated.

“Leading up to the refining pause, we have put contingencies in place to ensure that this decision does not impact our customer-facing businesses in South Africa or our fuel supply obligations,” said BP SA CEO Taelo Mojapelo.

With 35% of South Africa’s crude oil refining capacity producing 2.7 billion litres of petrol per year, Sapref is the country’s largest refinery.

It was previously forced to temporarily shut down operations during July 2021’s riots. The unrest had led to a shortage of critical materials reaching the refinery.

In the wake of the chaos, motorists were seen forming long queues at petrol stations out of fear that the country’s pumps would run dry.

At the time, the energy department was concerned that the shutdown would lead to shortages and announced regulations limiting the sale of petroleum products in portable containers.

Read: What oil at $100 a barrel means for the economy

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