South Africa: PetroSA Defends Coega Refinery
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Business Day (Johannesburg)
10 October 2008
Posted to the web 10 October 2008
Siseko Njobeni
Johannesburg
STATE-owned oil and gas company PetroSA yesterday came out in defence of its planned R40bn crude oil refinery in Coega, near Port Elizabeth, amid concerns that it could drive existing refineries out of business.
PetroSA's wisdom of building a 400000-barrel-a-day plant came under scrutiny at an oil summit in Midrand yesterday.
Speaking at the summit, Shell SA planning and strategy manager Leon Lizamore said PetroSA alluded to a possible surplus in refining capacity when the PetroSA facility came on stream in 2014. This, he said, could force PetroSA to direct the surplus capacity into the South African market, threatening the survival of existing refineries.
He said surplus capacity from the Coega refinery could be enough to replace an entire refinery or prompt the existing refineries to run at reduced levels. But PetroSA vice-president for new ventures Joern Falbe threw the gauntlet back at the company's critics.
"They ( other refiners) will take themselves out of business. They must upgrade their facilities. PetroSA is being globally competitive," Falbe said. New crude oil refineries being built in other parts of the world would raise the level of competition on crude oil and push the market to clean fuels, he said. PetroSA has said that the facility will meet clean fuels specifications.
Maurice Radebe, of Sasol Oil, said there had been strong growth in liquid fuels demand in recent years. The supply and demand balance indicated that SA would continue to rely on imports "for a number of years to come". Without investment in refineries, a long-term shortfall was expected. Radebe said demand for the inland market was estimated at 16,3-billion litres a year, while production capacity was estimated at 9,9-billion litres a year, leading to a shortfall of 6,4-billion litres a year.
The minerals and energy department and private sector players have called the two-day summit to, among other things, discuss the pricing regime of petroleum products, logistical and related infrastructural investment requirements, security of supply, the role of the state, as well as alternative sources for energy .
Minerals and Energy Minister Buyelwa Sonjica said that despite recent weakening, the crude oil price was still high "in both real and nominal terms, compared to the figures of 1998".
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She said when the department released the white paper on energy in 1998, the crude oil price was about $10 a barrel. This year it peaked at about $147 a barrel.
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