IN a third major blow for South Africa’s fuel refining capacity in recent years, the shareholders of SAPREF in South Durban, have announced an indefinite spend freeze and pause on operations at the country’s biggest crude oil refinery.
The suspension, set to come into effect by the end of March 2022, has drawn the ire of Energy Minister Gwede Mantashe, who described it as “greedy” and “arrogant” and promised “drastic measures” in response.
It follows the shuttering of the nearby Engen refinery in December 2020 following an explosion earlier in the year. This came after production at the Astron Energy refinery in Milnerton, Cape Town was halted in the middle of 2020 due to a fire.
In a statement, BP Southern Africa (BPSA) and Shell Downstream South Africa said the decision was taken after consultation with government, unions, and employees. “This will be for an indefinite period but with a re-start possible in the future, including in the event of any future sale.”
They added that the decision to pause refinery operations would have no impact on full time employees, at least “currently” and that safety remained a primary consideration. “Moving forward, the shareholders will use other existing assets and trading arrangements to ensure ongoing security of fuel supply to the country and their consumers.”
BPSA CEO Taelo Mojapelo said, “Over the many decades since its establishment, SAPREF has made immense economic contributions at both a local and national scale. For this reason, we continue to pursue the sale of our share in the refinery so that it can continue to advance its legacy as a reliable, safe and productive asset.
“Leading up to the refining pause, we have put contingencies in place to ensure that this decision does not impact our customer facing businesses in South Africa or our fuel supply obligations. We remain committed to South Africa through our demonstrated transformation initiatives in the value chain and continue to work with our strategic partners to strengthen our differentiated convenience offers,” Mojapelo said.
Hloniphizwe Mtolo, Country Chair, Shell Downstream South Africa, said the decision to pause the refinery was a difficult one for both shareholders.
“Shell remains committed to security of supply to our customers over this production pause. South Africa continues to be a key location for Shell as we progress our growth agenda as an energy provider of choice and a Nation Builder,” Mtolo said.
Threat to growth
But Mantashe is clearly not convinced by this argument. Speaking during a debate on the 2022 state of the nation address on Tuesday 15 February, he warned that the decision threatened South Africa’s plans to establish an upstream petroleum industry to support economic growth and meet energy needs.
MyBroadband reports that the minister highlighted the importance of securing fuel stocks, and cautioned that developments between Western countries and the Russian Federation in the Ukraine matter could spark a spike in fuel prices, negatively affecting local consumers and logistics providers.
He said the “greed and arrogance” of “certain petroleum entities” that want to shut local refineries and import their product would cause job losses, cost the economy dearly, and lead to uncertainty of supply.
Mantashe added the government was mulling “drastic measures” regarding the planned refinery closure, citing the country’s national and economic security. But he gave no details on these planned measures.
