South Africa eyes BRICS partners to build new $10 billion refinery

CAPE TOWN (Reuters) – South Africa wants the national oil companies of its BRICS partners to help build a new 400,000 barrel per day refinery that will be structured by senior debt and equity, energy minister David Mahlobo said. The idea of building a refinery in Africa’s most industrialised economy has been under consideration for almost a decade.

“South Africa is at a tipping point regarding its refining capabilities,” Mahlobo said, adding that the cost of the new refinery was estimated at $10 billion in 2010. The refinery can be structured with senior debt and equity,” Mahlobo told parliament’s energy committee. South Africa is a member of BRICS, a trading bloc that also includes Brazil, Russia, India and China.

In May, Mahlobo’s predecessor Mmamoloko Kubayi-Ngubane said South Africa, a net importer of refined oil products, would consider West Africa and the Middle East, including Iran, for potential partners on a new refinery project. She said cabinet expects to decide by December whether to build the refinery that has never came to fruition because of a lack of equity partners. Mahlobo said some refinery owners in South Africa wanted to exit the domestic market, citing the high costs of upgrading refineries to meet cleaner fuel specifications.

“The cost of the upgrades is estimated at over 40 billion rand ($3 billion) and 24 billion litres of liquid fuels are sold annually, so this can be funded through some type of levy,” he said of ongoing talks with industry about a possible cost-recovery mechanism they have demanded. Royal Dutch Shell, BP, Total and Sasol are among the main refinery operators in Africa’s most industrialised country.