SUBSCRIBEHaven't registered for our newsletter yet? Current NewsWorld-class crude oil refinery in the best interest of South AfricaMonday, 01 March 2010 15:38 Cape Town, 25 February 2010 - Although we recognize that BP may not be comfortable with fresh competition, building a new crude oil refinery would certainly be in the best interest of South Africa, says Sipho Mkhize, President and CEO of national oil company, PetroSA.  He emphasised that PetroSA's proposed new crude oil refinery at Coega, known as Mthombo, is totally in line with Government's Energy Security Master Plan that was introduced in 2007 after South Africa experienced a near-disaster in fuels supply shortages during December 2005. The cost to the country at that time was estimated at approximately R1 billion per day. Project Mthombo also fits perfectly with Government's recently announced Industrial Policy Action Plan (IPAP2) strategy that calls for efforts to scale up endeavours to expand production in value-added sectors by replacing imports and create growth and employment opportunities. PetroSA's business proposal to develop Project Mthombo has certainly not been a product of "haste". The Pre-Feasibility and Feasibility Studies, undertaken in participation with several world-class specialists, have been executed over a period of three years during which time issues such as the choice of Coega as the preferred location, configuration design, crude selection, supply and demand, commerciality, project financing etc have been thoroughly challenged. The Feasibility Study confirmed that Project Mthombo is strategically important, technically feasible and commercially viable. The project is now ready to proceed into the Front End Engineering Design (FEED) Phase. This process will take a further 15 months and will include several key decision "gates" during which progress and developments will be rigorously re-examined. Upon completion of FEED a recommendation will be made for the Final Investment Decision (early 2012). Mr Mkhize pointed out that the motivation for a new refinery is built on commercial and strategic considerations. "Although, clearly, the refinery will be commercially competitive, it addresses several of South Africa’s pressing needs that are just not considered by BP," he said. A new refinery will provide thousands of new jobs, contribute significantly to the economic upliftment of the Eastern Cape region that has been, historically disadvantaged, is a catalyst for introducing clean fuels in South Africa, and will play a major role in the transformation of the oil industry. Mr Mkhize said it is understandable why BP would prefer Mthombo not to become a reality. It would mean that South Africa would remain increasingly reliant on imported product, leveraging the global assets and trading activities of BP. It also means that profit generated in the regulated SA market is not re-invested, to any major extent, in the country. This is clearly not in South Africa's best interest. "Project Mthombo’s development has been an open, transparent and inclusive initiative during which PetroSA has, on numerous occasions publicly invited the local IOCs to participate in the venture. A few, unfortunately not BP, have shown interest in this invitation that includes exploring synergies between Mthombo and the existing local refineries," Mr Mkhize added.Project Mthombo will facilitate positive improvements in the SA Oil Industry, Mkhize concludes.
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