NATIONAL NEWS - PetroSA issued a media statement with a number of key points on Monday, 11 December.
GTL refinery at Mossel Bay
It noted that the reinstatement of the Mossel Bay gas to liquid (GTL) refinery was "critical for the economic development of the country".
It should be done soon because it impacted about "1 400 direct jobs and supports about
29 000 sustainable jobs and contributes about 0.6% to the GDP".
Diminishing refining capacity in South Africa
PetroSA pointed out that no new fuel refinery had been built in South Africa for almost 30 years. "In that period, the internal combustion engine evolved to reduce emissions, and demand for low-sulphur fuels has grown.
"Demand is increasingly being met by imports. In 2022, South Africa’s refineries accounted for less than 35% of finished products consumed locally, against about 80% in 2010. Yet the events of the last few years, including Covid-19 supply shocks and the impact of the Russia/Ukraine war, have underscored the importance of South Africa and the SADC region growing local fuel refinery capacity, not shrinking it, to ensure security of supply."
"The unavailability of oil and gas feedstock has a far reaching impact on linked downstream sectors, which rely on refinery by-products. Outputs from the petrochemical sector include chemicals such as synthetic rubbers and fabrics, industrial chemicals, and plastics, all of which are important inputs into various manufacturing processes.
The root causes of decline
South African refining nameplate is about 720 000bbl/d, of which crude refining accounts for 60% of the production (432,000bb/d). All the crude refineries were built in the 60s.
The fuel specification developments to address environmental concerns necessitates major capital investment into refining.
In order to maximise return on investment, South Africa needs to make strategic decisions on where and how the new refinery capacity must be deployed.
Most integrated oil companies (IOCs) own local refinery capacity. IOCs have over time increased imports of finished product for various reasons, including ageing local refining infrastructure, clean fuel regulations, which require massive investments in refineries to produce products that comply with emissions targets, cheap access to imported white product and the fact that trading margins are higher from import terminals than refineries.
For South Africa to bring refined product imports down to 15% of local supply, domestic refinery capacity must grow to 1,258,792 barrels per day (1.26 million barrels per day). This requires adding another 540 000 barrels per day to existing capacity.
Scale up GTL refinery
Our GTL refinery was put on a maintenance and care programme in November 2020 due to feedstock challenges. Following this a decision was made to reinstate the GTL by sourcing a Strategic Partnership. Submissions were received from various companies locally and globally.
The request for proposal (RFP) was evaluated as guided by the Public Finance Management Act (PFMA) requirements. The RFP process was concluded and handed over to follow all other government processes including Cabinet on the appointment of a strategic partner.
"PetroSA welcomes Cabinet’s decision, announced this morning (Monday, 11 December), to support PetroSA's working with Gazprombank-Africa to reinstate the PetroSA gas to liquid refining capacity as it enables PetroSA to move forward."
Call for policy change
There is a need to strictly regulate petroleum refiners and the import of refined petroleum products in SA. The incentive to protect and grow local refining capacity must be resolved through a pricing structure and policy position that only allows firms that are willing to assume the risk of refining locally and investing in Clean Fuels 2 to import and aggregate white product.
This entails changing the structure of the Basic Fuel Price and indexing it to local refining costs.
These player/s will then be able to amortise the required investments in refining infrastructure over time. This approach will also encourage IOCs to increase refining capacity to the level of mega refineries and benefit from the associated economies of scale.
Adopting these policies will benefit the South African economy and will incentivise increased local refining capacity that can produce for the SADC market and beyond.
Bolstered downstream business for Eskom support
"PetroSA remains committed to ensuring the security of energy supply for South Africa, supplying diesel to Eskom."
Aviation fuel supply
In June 2023, PetroSA acquired the terminal operatorship to supply jet fuel for George Airport and King Phalo airport,
Throughput volumes of JET A1 that have been achieved on a monthly basis, for both sites (King Phalo and George), are in the region of 2.7 million litres.
International footprint: Jubilee Southeast Project offshore of Ghana
"PetroSA is proud to announce a milestone achievement for its Partnership in the Jubilee Southeast Project Offshore in Ghana by recording first oils. The Jubilee Field has been in production since 2010 and the field has performed exceptionally well over the years. PetroSA’s involvement in this strategic partnership has been effective since 2012."
A major part of the development plan was focused on developing the southeast part of Jubilee, called the Jubilee South-East Project, which has now culminated in the first oil coming on stream that has been reported.
The 2023 production has recently been reported at an average of 100 000 barrels of oil per day. "This is a major milestone for the Greater Jubilee Joint Venture Partners which include PetroSA and Ghana as a country."
Energy transition anchored on gas and cleaner technologies
PetroSA noted "We see gas as holding a more dominant play in South Africa’s energy mix. There are multiple perspectives that must be reinforced to deliver the South African Gas Master Plan.
PetroSA is leveraging one gas bilateral between the government of South Africa and that of Mozambique in order to ensure continued supply to the South African Gas Industrial Users that are supporting about 76 000 jobs.
"The short to medium term strategic initiative is re-entering Block 9 with a partnership to produce gas that can be sold in the southern part of the country, thus enabling PetroSA to be ready for long-term supply of the Total-led development of Brulpadda and Luiperd field."
PetroSA noted: "We are fast tracking a gas to power initiative to provide an early power generation solution, which will leverage the commercialisation of its tail gas for power generation for Eskom or an alternative off-taker.
Through this project, PetroSA will plug about 180 Megawatts of power into the national grid as a long-term solution to address challenges relating to load shedding.
"To advance successful implementation, PetroSA recently invited private and public partners to submit proposals for strategic partnerships."
Financial turnaround
With an opinion classified as Unqualified with no material findings, PetroSA has declared a net profit of R1.4 billion for the 2022/23 financial year, as per the final audited outcome by the auditor-general of South Africa.
This is for the first time since a recorded net loss of R14 billion in 2015 that the entity has recorded positive results.
Notable is the significant revenue growth for the group, doubling from R12 billion to R24 billion.
Even though the average crude price was 11% lower than the previous financial year, a major part of the increase in revenue is a result of higher product prices. Group sales volumes were 12% higher than the previous financial year.
PetroSA concluded: "As a company, we remain resolute in our commitment to foster sustainable growth, ensuring the security of energy, and contributing to the economic development of SA in our quest to address the triple challenge of unemployment, inequality and poverty."
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