South Africa’s oil refining capacity has always been rather small when considered on a global scale, but there was some sense of national pride and of security in knowing that the country could deliver – even if most of the crude input had to be imported.

While local refineries were never able to fulfil South Africa’s demand for fuel in recent times – at 25-billion litres a year – local refining capacity helped to supplement imported supplies.

However, it would seem that the country is heading inexorably towards becoming almost entirely dependent on imports, as the local crude refinery industry seems to be drying up.

Industry body the South African Petroleum Industry Association (Sapia) executive director Avhapfani Tshifularo explains that South Africa currently meets about 60% of its fuel demand through imports – a figure which many experts believe will continue to rise.

Over the past few years, the country’s refining capacity has steadily been dwindling as the ageing local refineries have stopped operations one after the other on the back of significant global and domestic shifts in policy, supply constraints, rising production costs and the increasingly unfavourable economics of fossil fuel dependence in a world headed for greener energy pastures.

The latest blow to the local refining industry was the mothballing of South Africa’s largest refinery at the end of March. Shell and BP South African Petroleum Refineries (Sapref), in KwaZulu-Natal, had a peak capacity of about 180000 bbl/d, or a contribution of 35% to the country’s crude refining capacity, which amounts to about 25% of South Africa’s total liquid fuels production capacity.

The decision to indefinitely pause operations and freeze spending at Sapref, made by co-owners BP Southern Africa and Shell Downstream South Africa, was taken to allow for an informed finalisation on the various options available – a sale option being the most preferred.

Although BP Southern Africa CEO Taelo Mojapelo said in February that contingencies had been put in place to ensurethe shutdown of the refinery did not impact on customer-facing businesses in South Africa or fuel supply obligations, politicians, analysts and industry players have been left wondering about the way forward.

Since Sapref’s halt was announced on February 10, talk of the State possibly acquiring the operation has been circulating, with KwaZulu-Natal Premier Sihle Zikalala and Mineral Resources and Energy Minister Gwede Mantashe both going on record with sentiments in favour of nationalising the refinery, most likely through the State-owned Central Energy Fund (CEF).

CEF corporate affairs manager Jacky Mashapu all but confirmed that talks were under way by telling Engineering News & Mining Weekly that the CEF was not able to comment owing to a nondisclosure agreement being in place.

Moreover, various news outlets reported that a CEF delegation was seen visiting the refinery in early March.

However, energy association the South African National Energy Association director Dave Wright does not believe that buying the aged refinery is necessarily the best option, which will cost taxpayers more than it is worth to keep operating and could leave the country with a stranded asset in about 10 to 15 years.

“Government is fixated with the idea that security of supply is linked to processing crude oil. That may have been the case several decades ago, but not anymore,” he tells Engineering News & Mining Weekly, noting that more than enough refining capacity exists globally to make up for the shortfall that would arise from local refineries’ closing.

Global refinery capacity in 2020 amounted to about 101.2-million barrels a day, while actual global refinery throughput was about 76-million barrels a day, thus leaving spare capacity of about 25-million barrels a day. This figure will likely increase as the developed world continues to move away from liquid fuels as part of the electric vehicle revolution, consequently reducing d...