Parliament’s Portfolio Committee on Mineral Resources and Energy has recommended that government look at building a ‘mega’ fuel refinery in South Africa as a way of securing the country’s energy reserves.
In a meeting held on Tuesday (29 March), the committee raised concerns about the recent closure of refineries in the country and the impact this will have on existing fuel supply challenges.
“It must also be noted that upgrading the existing refineries to meet the cleaner fuels standard is often cited as a challenge by the companies in the refining sector – arguing that upgrading would not be economically sustainable.”
This has led to a debate on whether the country should invest in upgrading the existing refineries or build a new ‘mega refinery’ in line with international trends, the committee said.
Petroleum companies BP and Shell announced they will pause operations in Durban by the end of March 2022 as they attempt to find a buyer. 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. Engen recently announced a similar decision around its refinery operations.
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 chief executive Taelo Mojapelo.
KwaZulu-Natal premier Sihle Zikalala said his province has now begun talks with petroleum companies BP and Shell and the national government to purchase South African Petroleum Refineries (Sapref).
“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.”