Page 4 - DMEA Week 10 2023

DMEA COMMENTARY DMEA

KwaZulu-Natal in talks

about Sapref’s future

As KwaZulu Natal mediates to urge the restart of Sapref, other units are slowly returning

to action, offering a ray of light after a miserable few years in South African refining

SOUTH AFRICA SOUTH Africa’s KwaZulu-Natal provincial diesel, marine fuel, bitumen, base oils and par-
government has announced it is discussing the affin waxes. Its closure came around six months
future of the Sapref refinery with the Depart- after the government implemented its Clean
WHAT: Talks on ment of Mineral Resources and Energy (DMRE) Fuels 2 (CF2) legislation, under which the new
re-starting Sapref are and operators Shell and BP. The 180,000 barrel Petroleum Products Specifications and Stand-
ongoing, with the regional per day (bpd) plant, located near Durban, has ards mandate the use of ultra-low-sulphur gas-
government looking to been closed for almost a year. oline and diesel products from September 2023.
secure jobs and industrial Sapref is one of several South African refin- The South African Petroleum Industry Asso-
output. ing assets that have gone out of service in recent ciation (SAPIA) warned at the time that the new
years, seriously hampering the country’s ability legislation could make the country’s remaining
WHY: Following mass to meet domestic fuel demand and leading to refineries obsolete within two years without
shutdowns, South Africa’s price spikes on the local market. financial support. SAPIA has since been work-
domestic refining industry ing with the government to find a resolution to
all but collapsed. Closure issues with funding the upgrade of six refineries
Sapref was closed in March last year, follow- in the country to allow them to produce cleaner
WHAT NEXT: ing an earlier announcement by BP and Shell fuels.
There is room for hope which said they could not commit to any further It warned that refiners would be unlikely to
though as work continues expenditures until they decided on the fate of the carry out nearly $4bn worth of combined over-
to rehabilitate other plant, operated through a joint venture. haul work without government support or per-
previously decommissioned “The decision has been taken to allow an mission to raise fuel prices, and this is likely to
refineries. informed finalisation on the various options have factored into the government’s decision in
available to the shareholders, a sale option being August to postpone the CF2 deadline until 2027.
the most preferred,” they said. “Until decisions Thanks to a combination of legislation and
about the future of the plant have been made – mismanagement, the country has seen a mass
including a possible change of ownership – the decline in operational refineries, with Glen-
Sapref shareholders are unable to commit to fur- core’s 100,000-bpd Astron Refinery in Cape
ther investment in the refinery. Town being taken out of commission following
a mid-2020 explosion and Engen Petroleum, a
In the middle subsidiary of Malaysia’s state-owned Petronas,
KwaZulu-Natal’s premier Nomusa Dube-Ncube announcing its ambitions to turn its 120,000-
said last week that the government is “facilitat- bpd refinery in Durban into an import termi-
ing a meeting with the shareholders to come to nal following years of losses and a fire. Various
some conclusion on the plan to resuscitate or other factors have also conspired to significantly
explore options on what is required to bring the reduce usability and utilisation rates at NOC
facility back to operations as per our previous PetroSA’s 36,000-bpd Mossel Bay gas-to-liquids
commitments.” (GTL) facility over the past two years. Continu-
Official involvement in the plant’s future has ing shut-downs the 107,000 bpd National Petro-
been mooted since late 2021, and just days after leum Refiners of South Africa (Natref), Sasol’s
its closure, two sources at the Central Energy 160,000 bpd Secunda coal-to-liquids (CTL)
Fund (CEF), which manages South Africa’s plant and Sapref meant South Africa had no
energy assets, told Bloomberg that the fund was operational refineries as of July 2022.
assessing options for buying the Sapref unit.
The sources noted that they could leverage A new lease of life
green financing to carry out upgrades to meet However, while the Sapref talks appear some
new clean fuel regulations. This was the second way off bearing fruit, there are signs that a revival
time in five months that such comments have may be on the cards as operators aim tap into the
emerged from the CEF, following reports in massive gap in domestic fuel production.
October 2021. While it is not officially shut-in, local firm
Sasol and its French partner TotalEnergies had
Shake-up faced issues procuring feedstock last year for
Prior to closing, Sapref was producing gasoline, their Natref JV unit in Sasolburg. In August

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