By KWANELE DHLADHLA | 2022-06-23

Matsapha - The closure of refineries in South Africa has posed an imminent threat for adequate supply of fuel in the kingdom.

The SA Petroleum Association Executive Director Avhapfani Tshifularo has warned petroleum industry players that following the closure of strategic refineries in Eswatini’s major trading partner, there was a strong likelihood that exports of fuel products to the kingdom could be significantly affected.

“The closure of this important manufacturing sector will negatively impact the Gross Domestic (GDP), worsen the South African trade balance and increase the supply risk of petroleum products - including that to Eswatini,” said Tshifularo during the meeting, which was convened by JBH Management Consultants at Esibayeni Lodge yesterday.
Tshifularo recounted that in 2019 there were six operating refineries with capacity of around 700 000 barrels per day bpd (oil equivalent).

However, as at June there were just two, being Sasol Secunda (coal / gas to liquids), Natref (crude oil).

He mentioned that shutdowns had occurred at the Engen refinery at the end of 2020 following an incident. Subsequently, he mentioned that the owners announced its permanent closure and conversion to an import facility.

PetroSA (Mossel Bay) closed shop in late 2020 due to lack of feed, the plant now remains on care and maintenance.

Operations

Astron Energy Refinery (Cape Town) was shut down in July 2020 following an accident during start-up operations – set to recommence operation in second half of this year.
SAPREF (Durban) paused operations at the end of March after shareholders’ announcements to reconfigure their asset portfolios towards lower carbon footprint.

Tshifularo said the decision concerning closures or pausing of operations (Engen refinery and SAPREF) were likely linked to the significant capital requirements to invest for the production of very low sulphur fuels.

He pointed out that despite prior acknowledgement of the necessity for financial assistance, the SA government was unlikely to provide support given present fiscal constraints.
Tshifularo noted that without the required support serious decisions over the future of Natref and Astron energy refinery would be required.

“When these refineries finally closed the total impact of all closures will be placing about 64 000 jobs in the sector under risk – note logistics and retail parts of the value chain relatively unaffected,” he said.

Tshifularo shared that South Africa had been a net importer since 2006 – the onset of the clean fuels programme.   
He mentioned that imports had grown steadily since that time but exacerbated in recent years as a result of the Engen refinery shutdown and the incident at Aston Energy Refinery in Cape Town.

The executive director said imports throughout this period initially had significant volumes of petrol but had become predominantly diesel due to an overall decline in petrol demand.
“If all refineries are shut down (excluding Sasol Secunda), then total imports could rise to about 24 billion per annum for liquid fuels – this can present a serious supply risk,” explained Tshifularo.

The executive director went on to say the CIA fact book estimated Eswatini consumption of about 5 300 bpd with the majority of imports through Golela (Lavumisa) for both petrol and diesel of about 4 000 bpd from South African Revenue Service (SARS) export figures.
He said imports from South Africa appeared to be negatively affected by recent (since 2020) SARS increase in controls – presently under discussion with SARS.

Increase

“Strategically for Eswatini, consideration should be given to increase reliance on petroleum product imports directly from Mozambique (Lomahasha and Mhlumeni),” Tshifularo advised.
  Worldwide, complaints about high fuel prices – most of the blame was laid at the Ukraine / Russian conflict.

Tshifularo noted that while this was a factor, the situation was more nuanced. He said the COVID-19 pandemic had led to significant supply chain disruptions – three million bpd of refinery capacity had been permanently shut down.

 Worldwide, economies were returning to normal meaning that oil demand had rebounded – in the US, for example, jet fuel demand was back to pre-COVID-19 levels.
Recent Chinese COVID-19 shutdowns also constrained petroleum product exports.
“With constraints on Russian crude purchases from the West this has an added incentive to push crude prices still higher,” he added.  

Unleaded petrol (ULP 95) prices recently increased from E19.05/litre to E21.55/litre, Diesel (0.005%) price hiked from E19.60 litre to E22.10/litre; and paraffin prices rose from E14.35/litre to E16.85/litre.

The SA Petroleum Industry Association represents the collective interests of the South African petroleum industry.  

The association plays a strategic role in addressing a range of common issues relating to the refining, distribution and marketing of petroleum products, as well as promoting the industry’s environmental and socio-economic progress.  

The association fulfils this role by contributing to the development of regulation in certain areas of SA policy, proactively engaging with key stakeholders; sharing research information, providing expert advice and communicating the industry’s views to government, members of the public and the media.

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