- Glencore expects to reopen the shuttered Cape Town oil refinery this year.
- Upon reopening, the operation will be able to produce additional products and will have an improved cost base.
- The commitment comes as Sapref becomes the latest refinery in SA to halt operations.
Glencore’s Astron Energy will this year reopen the Cape Town oil refinery amid a "strong commercial case" to bring the operation back online.
Speaking to Fin24 following the release of Glencore’s annual results on Tuesday, the group’s South African-born CEO Gary Nagle said its subsidiary, Astron Energy, is "absolutely committed" to restarting the refinery. It hopes to be able to restart it towards the end of this year, subject to completion of the remaining works.
The commitment to reopen the operation bucks the trend in South Africa where oil and gas majors are opting to close refineries rather than invest in refurbishing and upgrading them, especially in light of incoming clean fuel regulations.
Engen’s Wentworth refinery has been closed and converted to storage after it was ravished by a fire in late 2020. PetroSA has basically been out of production ever since it ran out of offshore gas feedstock around the same time. Shell and BP last week resolved to halt operations at Sapref as the two are unprepared to invest further in the refinery. Sasol and Total’s Natref refinery is also on the chopping block as the two mull selling or closing the operation.
Astron’s refinery – formerly known as Calref and which Glencore acquired with all Chevron’s SA assets in 2019 – has been offline ever since mid-2020 when a deadly fire caused the plant to shut. And industry observers have grown deeply sceptical that Astron truly intends to restart operations.
But Nagle said the restoration has progressed.
"It’s not just a rebuild to what we had before. We’ve actually improved the refinery. We will be able to produce additional products. We've changed the cost base. And we believe that, certainly, we'll bring on that refinery, it will be profitable."
Within time, he said, the refinery will also be able to produce fuels to the specifications required by South Africa’s incoming clean fuel legislation. "So we are bringing it back on and we believe there is a commercial case to do that," Nagle said.
In the group’s annual results, released on Tuesday, Glencore notes that the regulatory approval for its acquisition of the Chevron required it to invest R6.5 billion to debottleneck and improve the performance of the Cape Town refinery, to contribute to the rebranding of certain retail sites and establish a development fund to support small and black-owned businesses in Astron Energy’s value chain.
The global mining and trading group reported a stellar annual performance for the year ended in December 2021 on the back of rising demand for its products. Highlights included a 43% jump in revenue to $203.75 billion (~R3 trillion), record earnings of $21.3 billion (~R322 billion), and $4 billion (~R60.4 billion) in shareholder returns, comprising of dividends as well as a new share buyback programme.
The group also announced provisioning of $1.5 billion in anticipation of fines that may be levied as US Authorities wrap up probes into Glencore. The probes by the US Department of Justice and US Commodity Futures Trading Commission are anticipated to culminate in resolutions of bribery and market manipulation. Also part of the provisioning are other investigations by the UK Serious Fraud Office and the Brazilian Federal Prosecutor’s Office which remain ongoing and which are also anticipated to be finalised this year.
While Glencore has faced criticism from certain quarters over its decision to run down its coal mines rather than to sell them on, Nagle stood firm on the strategy indicating that shareholders continue to express support for the strategy, just as they did when it was put to a vote at the group’s AGM last year and received almost 95% approval.
Nagle further described Glencore’s climate change strategy as "sector leading", as it sets short-, medium-, and long-term targets for scope 1, 2, and 3 emissions with a goal for the group to reach net-zero by 2050.
Part of that strategy involves cutting the footprint of carbon-intensive operations, including the ferroalloys business in South Africa which has performed well in the year under review but is under pressure from increasing electricity tariffs.
Glencore ferroalloys head Japie Fullard said there are several initiatives to pursue alternative energy solutions. Notably, a pilot project with Swedish Stirling will make use of smelter off-gas to generate electricity. Also under consideration are solar and wind projects for which pre-feasibility studies are advanced.
*This story has been corrected to reflect that the Altron refinery has been offline since mid-2020 following a deadly fire, and not mid-2018 as initially reported.