Picture: Motshwari Mofokeng /African News Agency (ANA)
Picture: Motshwari Mofokeng /African News Agency (ANA)

Engen refinery plan sparks anger

By Vernon Mchunu Time of article published Apr 30, 2021

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DURBAN - COSATU yesterday disputed the assertion that the Engen refinery was not financially viable, saying the high price the company was charging for its fuel products meant that it remained a profitable business.

The labour federation was reacting to the impending shutdown of the petroleum products giant’s refinery.

The company has announced a decision to close its refinery and convert the South Durban-based site into an import terminal and product storage facility.

Managing director and chief executive Yusa’ Hassan said that the refinery-to-terminal (RTT) re-purposing initiative was based on a strategic evaluation that confirmed the plant was no longer financially viable.

Hassan, who has allayed fears of job losses, added that investments required to upgrade the refinery in line with evolving fuel quality and emissions regulations would be unaffordable.

Cosatu provincial secretary Edwin Mkhize said: “It cannot be true that when the fuel price is so high, Engen can claim to be having no money.”

“This is part of a growing trend by companies to feign being in the red, which is a trick aimed at baiting the government – desperate to save jobs – to bail them out with billions of the taxpayer’s hard-earned rand. The company would then redirect its reserved billions for offshore investments,” Mkhize said.

“What we notice is that as management engages in a plot to render the company as being financially in crisis; they make sure they do not consult with us (trade unions) simply because they know we will ask questions,” Mkhize said.

Economic Development, Tourism and Environmental Affairs MEC Ravi Pillay said the petroleum group had committed to ensuring that the RTT, set to be finalised by the third quarter of 2023, would not lead to job losses.

“(Engen) has written to us pledging their commitment to protect the existing jobs. On the basis of that which they have promised us on paper, we can then say there will be no job losses,” said Pillay.

“They have said what will actually happen is re-skilling of employees. And some people would be redeployed elsewhere within the organisation,” he said.

Engen, the country’s second-largest oil refinery after Sapref and the producer of 17% of SA’s fuel, said it had engaged extensively with the government on the conversion initiative.

“After modelling multiple scenarios in consultation with external international sector specialists, it has become very clear that the Engen refinery is not commercially viable.

“We must safeguard the long-term sustainability of the business. Therefore, we are proceeding with the conversion to a terminal,” Hassan said.

“Engen refinery is unsustainable in the longer-term, which is primarily due to the challenging refining environment as a result of a global product supply surplus and depressed demand, resulting in low refining margins, and placing the refinery in financial distress. Furthermore, unaffordable capital costs to meet future CF2 (Clean Fuels 2) regulations compliance continues to be a challenge for the long-term sustainability of the refinery,” Hassan said.

The regulations stipulate that sulphur levels in petrol and diesel must remain below 10 parts per million (ppm).

The RTT was part of a long-term business sustainability strategy to ensure the company became resilient against future market threats and could respond with agility to new opportunities, said Hassan. “It also has a knock-on benefit of a reduction in emissions and carbon footprint that will contribute towards Engen’s environmental stewardship commitments. The conversion will also deliver a significant drop in electricity and water consumption, which will mean more electricity and water will be available for under-served households.

“Our people are a priority during the RTT transition, and it is our firm intention to preserve as many (jobs) as possible. We are initiating a reskilling and retooling programme, as well as evaluating the potential for some employees to be redeployed to other parts of the Engen organisation.

“We also expect that the re-purposing of the refinery site to develop new business opportunities (for example, a training centre, renewable energy initiatives, shared services, industrial hub etc) will ensure that we mitigate, as much as possible, the impact on existing roles,” Hassan said.

“Throughout this review process, Engen prioritised regular communication with employees, keeping them abreast of all relevant developments.”

THE MERCURY

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