South Africa has lost roughly half of its domestic refinery production in less than a decade, making the country more vulnerable to global price shocks due to its growing reliance on imported fuel.
In 2019, 78% of South Africa’s fuel demand was supplied locally, which has halved to 39% seven years later.
This massive drop is the result of shutdowns or idling at many of the country’s fuel refineries, which have been plagued by ageing infrastructure, accidents, gas shortages, high operating costs, and economic hurdles.
Speaking to 702, Stellenbosch University military and security analyst and researcher Joan Swart explained that South African chemical and energy company Sasol supplies a quarter of local fuel demand.
Unlike other refineries, which typically rely on crude oil or natural gas to produce refined fuel, Sasol uses a coal-to-liquids method at its Secunda facility to turn coal into synthetic fuel, making it less reliant on international suppliers.
“[Sasol] uses coal as an input, whereas all the other facilities use crude oil, which is imported. At the moment, we’ve got two refineries: Natref and Astron,” explained Swart.
Natref and Astron convert imported crude oil into refined fuel, and PetroSA operates a facility that processes natural gas into synthetic fuel.
However, the PetroSA refinery is currently idle due to a shortage of gas feedstock, reported BusinessTech.
All told, Sasol’s Secunda plant and the two crude oil refineries only provide 39% of South Africa’s fuel demand, forcing the country to become more reliant on imported refined petroleum products.
Swart explained that the SAPREF (South African Petroleum Refinery) and ENREF (Engen Refinery), located in Durban, used to produce 180,000 and 120,000 barrels of oil per day, respectively.
However, SAPREF paused its operations in 2020 due to economic reasons and was permanently shut down after a major flood in 2022. Similarly, Engen’s refinery was closed in 2020 after a fire caused severe damage to the facilities.
The loss of both plants has taken away a significant portion of South Africa’s domestic fuel production capacity.
The SAPREF site is currently being evaluated for a R117 billion redevelopment plan that aims to rebuild and expand the site to a new capacity of between 400,000 and 650,000 barrels per day.
South Africa suffering from a lack of domestic fuel production
Swart said that it would take several years to address the challenges faced by the fuel refining sector and restore South Africa’s domestic capacity, even with additional funding.
“Another problem in terms of the facilities that we build is that we overrun the planning, so it will take five to probably ten years to build it,” he said.
South Africa’s fuel sector is in a precarious position, as Minister of Mineral and Petroleum Resources Gwede Mantashe recently disclosed that the country has only 6.9 million barrels of oil in its Strategic Fuel Fund.
This is only enough to provide around 30 days of crude oil cover at South Africa’s current processing capacity of 200,000 barrels per day.
Mantashe noted that South Africa’s reduced domestic refining capacity has made it more vulnerable to the oil shocks caused by the Iran war.
However, he added that Sasol’s Secunda plant has played a major role in stabilising the market thanks to South Africa’s abundant coal resources.
Even so, the nation’s low strategic oil reserve levels are still a concern, prompting the Department of Mineral and Petroleum Resources to publish a draft Strategic Stocks Policy.
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