Five years ago, the government announced plans to introduce the new fuel specifications, which will require local petroleum companies to spend billions of rands in refurbishments in order to comply.
But fuel producers have complained about the high costs of operating the refineries. A report on the economic impact of the industry - released in September last year - said that without the same economies of scale, operating costs of refineries in South Africa were approximately 100 percent more than those of competitors in South East Asia.
Sasol executive vice president of energy business, Maurice Radebe, said the industry contributed 8.5 percent of South Africa’s gross domestic product, with approximately R330 billion of annual turnover and an income tax of R4 billion. “If you have an industry that is strategic, it is important for the government to ensure that it is sustainable,” he said.
He said the petroleum and liquid fuels industry should not suffer the same fate as the steel industry, which has been struggling due to the effects of a global overcapacity. “Let us do our best to protect (the petroleum and liquid fuels) industry for the sake of the economy,” said Radebe. The fact that there had been no new developments on the funding mechanism for the refinery refurbishments caused “a great deal of uncertainty. We must make that decision quickly.”
According to the South African Petroleum Industry Association (Sapia), the body that represents the main petroleum and liquefied petroleum gas companies in South Africa, the local industry sells approximately 27 billion litres of petroleum a year.
Recent Sapia figures showed that South Africa had the second largest refining capacity in Africa after Egypt, with a total refining capacity of 703 000 barrels a day.
The new fuel specifications were initially meant to be introduced in July. But the government has since moved the July deadline to an unspecified date.
South Africa had six operating refineries, four on the coast, and two inland. Sapia executive director Avhapfani Tshifularo in March said the funding of the refinery investments remained unresolved.
Meanwhile, in the midst of the raging debate about the pace of economic transformation, Radebe lauded the strides made by the liquid fuels and petroleum industry to transform. He said that the industry had particularly done well on meeting the ownership targets set by the Liquid Fuels Charter. The charter, released in 2000, called for 25 percent black ownership across the value chain within 10 years.
He said some of the black economic empowerment (BEE) deals sealed in the industry had since been paid up. These included the deal between Sasol Oil and its BEE partner, Tshwarisano. “[Tshwarisano is]getting dividends,” he said.
However, Radebe said the industry needed to improve the appointment of women to senior positions and the participation of previously disadvantaged South Africans in crude procurement.
The other elements of the charter were enterprise development, skills development and employment equity.
BUSINESS REPORT ONLINE