More than R7-billion later the Coega Development Corporation (CDC) appears to be close to securing its first anchor tenant.
The Mail & Guardian has learned that PetroSA chief executive Sipho Mkhize and department of minerals and energy director general Sandile Nogxina were set to visit the CDC late this week to discuss housing PetroSA’s mooted R39-billion crude-oil refinery.
If it goes ahead the new refinery will be the biggest petro-chemical refinery in South Africa with a projected output of 200 000 barrels of fuel a day. It will become a major petro-chemical complex with huge export potential.
The Eastern Cape industrial development zone has been in negotiations with a number of potential anchor tenants, but until now has not managed to get any of them to sign on the dotted line.
”The fact that PetroSA considered Coega as the prime location is a massive vote of confidence in the Coega IDZ,” says CDC spokesperson Ongama Mtimka.
Department of mineral and energy’s chief director for hydro-carbons Nhlanhla Gumede says situating the new refinery at Coega was a strategic move for South Africa as it will reduce the country’s over-reliance on Durban for fuel imports and it will be easier to get fuel to the Western Cape.
Gumede says the move might require a pipeline to be built from Coega to inland South Africa to transport fuel, but that this was strategically a good idea as it would provide an alternative to the Durban pipeline.
The mooted refinery, which has been dubbed Project Mthombo, is expected to come on stream in 2014/2015 and will produce more than 200 000 barrels of fuel a day.
The refinery is expected to diversify South Africa’s fuel supplies and potentially offer export opportunities for the country.
PetroSA will look to produce other products besides petrol and diesel, including gas, jet fuel, polyethylen and polypropylene.
Project Mthombo could become part of the government’s plan to increase the use of gas in the South African economy.
Late this week PetroSA announced that it had been awarded exploration rights for Area A, situated near the Namibian border and north of South Africa’s Ibhubesi gas field, which it hoped would add ”significant hydrocarbon reserves to its portfolio”.
PetroSA’s vice-president of new ventures mid-stream, Jörn Falbe, says if the parastatal manages to secure the right international partners there is potential for exporting finished fuel products.
There has been speculation that one potential investor could be Venezuelan state-owned crude oil supplier, Petroleos de Venezuela.
Venezuelan President Hugo Chávez has often spoken about the need for greater cooperation between southern hemisphere nations to reduce the countries’ reliance on developed economies.
Gumede says South Africa imports 80% of its crude supplies from Iran and Saudi Arabia.
”If anything was to happen in the Middle East we, as a country would be facing serious challenges,” says Gumede. ”It would make sense to bring in a partner from elsewhere.”
Falbe says PetroSA is looking for partners across the value chain, whether for crude supply, uptake of finished products or as equity partners in the refinery.
The shortage of refining capacity in the Southern Africa Development Community region could result in countries such as Namibia or Mozambique becoming potential partners where PetroSA could sell its finished-fuel products, says Falbe.
Africa exports 86% of its crude oil production and imports 72% of its finished-fuel products, while its oil consumption is expected to grow by 5% a year until 2012.
PetroSA announced this week that it had awarded the contract to conduct its pre-feasibility study to international engineering company Kellogg, Brown & Root International, which is based in Houston in the United States.
”The pre-feasibility study focuses on determining the economic optimum configuration for the refinery, which includes the crude-oil type and costs, the required product slate, prices and specifications and the capital and operating costs,” says Falbe.