Kubayi: new refinery will boost SA industrialisation

Cape Town – A new modern oil refinery will aid South Africa’s industrialisation efforts and make it less reliant on imports which are highly exposed to foreign exchange fluctuations, said the Energy Department. 

Newly appointed Energy Minister Mmamoloko Kubayi tabled the department’s budget for the 2017/18 financial year on Friday and announced a number of initiatives, including investment in oil refining capacity. 

“I have come to the conclusion that our country and indeed the sub-region is ready for a new refinery investment,” she said in her speech. 

By the time any new refinery is completed, South Africa will be importing more than one-third of its fuel requirements, Kubayi said, and the high dependence on import finished product is neither good for energy security nor does it advance local industrialisation. 

She said she’ll approach Cabinet in the third quarter of the financial year for a “firm decision” about the project, but added that her department would prefer a public-private partnership which should be majority South African-owned. 

READ: China firm to buy Chevron SA assets 

At a media briefing after the budget speech, the department was asked if there was really a need for additional refining capacity given the global situation in the international oil market.

Deputy Energy Minister Thembisile Majola responded, saying that South Africa spends a lot on foreign exchange to import oil, while prices are fluctuating. 

“There’s also a bigger issue: we need to be able to plan and manage this and have minimum control over this. Even if we have our own refining capacity – it will never be enough. Our requirements grow on a daily basis,” she said, adding that South Africa’s energy security should also be on behalf of its landlocked neighbours on the continent. 

Gas infrastructure

Turning to gas, Kubayi said South Africa doesn’t currently have access to indigenous gas that can be exploited from the intended shale gas programme. She stressed that gas is an integral part of South Africa’s energy mix. 

In the short term – between three and five years – South Africa will, therefore, import liquefied natural gas from the international market through the Richards Bay harbour. 

Over the medium term, South Africa intends developing pipeline infrastructure from the Rovuma Basin in Mozambique into South Africa.

“This will not only enable us to have access to natural gas from a neighbour, but it will also improve the possibility of a relatively attractive gas pricing formula relative to sourcing gas from the international market,” Kubayi said. 

She believes South Africa will in the next ten to 15 years be able to source shale gas from the Karoo basin. 

READ: SA's economic future lies in oil and gas - Zwane 

Mineral Resources Minister Mosebenzi Zwane earlier said three vertical boreholes of up to 1km will be drilled in Beaufort West to assess the groundwater levels and movement. 

The United States Energy Information Administration estimates South Africa has 390 trillion cubic feet in unproven, technically recoverable shale gas resources.

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