BP slams new SA Refinery plans

Oil company BP has called for all options to be considered before a new 400 000 barrel-a-day oil refinery is built at Coega in the Eastern Cape.

"Government must consider expansion of existing refineries before embarking on the construction of a full-blown Greenfield refinery," BP Africa said in a statement on Friday.

Chief executive Sipho Maseko said the government should review all long-term regional supply options for petroleum products before any decision was made. "There is enough surplus refinery capacity in the world and it is likely to remain so beyond 2020.”It therefore makes no sense to burden South African taxpayers when better and cheaper options are available than building a new, expensive refinery." The surplus were four times bigger than those for crude oil, so it was doubtful that energy security in South Africa would be better served by building a new local refinery. "Our energy security is not an issue due to the ready availability of high quality clean fuels on the world market."

Maseko said the real bottlenecks were in pipeline and (mainly inland) terminal and logistics infrastructure. "This is where immediate investment needs to be focused." He said it would be cheaper, more manageable and more affordable than a new refinery. "BP is not opposed to investment in local refinery capacity, but in the interest of the country and its taxpayers, a decision to make such an investment should be carefully considered and only taken following a thorough examination of all options."

He said that constructing a refinery was a massive task. "It requires careful consideration given the scarce capital and resources available." Maseko said BP Africa's international experience told the company that it was simply not feasible to construct and commission a new refinery by 2014, "even if the decision was taken today, and certainly the full cost of such a project is quite likely to be over 50 percent more than what is being projected". Maseko noted that, so far, the extent of the world petroleum product surplus had not been highlighted. "Nor has anyone taken note that no other country is planning major refining projects for at least the next decade," he said. No notice had been taken of the cost of building a new long distance pipeline from Coega to the inland market. "Nor has it been acknowledged that such a pipeline will be surplus to our needs, given that the existing infrastructure in Durban can be leveraged at low cost, in particular the new multi- product petroleum pipeline (NMPP) pipeline, funded by the taxpayer and motorists, will meet inland demand at least until 2030."

State-owned PetroSA received a manufacturing licence in October 2008 from the department of minerals and energy for the firm's Project Mthombo a 400 000 barrel-a-day oil refinery to be constructed at Coega at a cost of US 9 billion.

Source: SAPA, 21 February 2010