Back oil refineries or face a crisis, warns PFC Energy

2012-10-27 11:06

The government must give greater support to oil refineries or risk them closing down, says PFC Energy, the leading global adviser to energy companies and organisations.

Oil parastatal PetroSA has ­already expressed fears of an Eskom-type energy crisis unless government starts to back up its commitment to oil refinery infrastructure with action.

PFC Energy urged government to agree to compensate oil refiners for the huge investment they will incur when they adjust their plants to comply with the 2017 European deadline for cleaner fuels.

All South African oil refineries – existing ones and those still to be built – have to comply with the new quality specifications for environmentally friendly liquid fuels.

PFC says the liquid fuels ­industry in South Africa is ­increasingly becoming reliant on imports to meet the country’s growing consumption of diesel and petrol.

Giving a presentation on the country’s liquid fuel outlook at PetroSA’s offices in Johannesburg this week, PFC Energy (Africa Oil and Gas) senior manager Stanislas Drochon said some of the liquid fuel refiners in the country had already threatened to shut down their refineries because they were not getting support from the government.

“As government has to comply with some of the quality specifications for petrol and diesel, notably that their sulphur content be aligned with European standards by 2017, refiners will have to adapt their plants to suit the new specifications,” said Drochon.

“In order to comply with these new quality standards, refiners will need to invest heavily, which is not making them happy.”

The refiners have asked the South African government to provide compensation that will cover all or most of the cost of the required investment, and some have more or less threatened to shut their refineries if they do not get enough support from government.

Drochon said it was ­difficult in South Africa to track liquid fuel consumption patterns as the department of energy had stopped publishing the data, adding this was not helpful to the industry as it made it difficult to make informed investment decisions when you do not have reliable data concerning the size and rate of growth of your market.

“PFC Energy has made estimates and believes that consumption of liquid fuels stands at close to 500 000 billion barrels per day and that it will grow by a further 70 000 billion barrels per day in the next five years,” said Drochon.

The department of energy ­admitted to problems in the publishing of consumption ­data, saying there were problems of collusion between the liquid oil companies.

Thandiwe Maimane, the department’s chief director responsible for communication and knowledge management, said the annual liquid oils consumption based on sales by the SA Petroleum Industry Association member companies for 2011 were:

» Diesel (all grades) – 9.7 billion litres

» Jet fuel – 2 billion litres;

» Petrol (all grades) – 10.5 billion litres; and

» LPG – 610 million litres.

She said government was aware of the growth in liquid fuels consumption in the country and it monitored this on an ongoing basis.

“That is why Project Mthombo is one of the strategic projects in the presidential infrastructure coordinating committee.”

In his advice to government, Drochon said it must not be complacent about the liquid ­fuels situation, and urged it to be proactive.

“It needs to decide what kind of refining industry it wants in future. I don’t think it can rely entirely on the private sector to take care of these decisions.

“Is government comfortable with a situation where the country will have to import ever­increasing volumes of petrol and diesel from faraway foreign refineries, or does it prefer to ­invest in its own refining industry?” Drochon asked.

“Does it prefer to do so in the existing South African refineries, which in most cases are relatively old and not very efficient, or does it prefer to build a new world-class state-of-the-art refinery?”

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