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South Africa sees new Saudi-backed USD10B refinery onstream by 2028

November 11/2019

MOSCOW (MRC) -- South Africa’s Central Energy Fund (CEF), partnering with Saudi Aramco, expects a proposed new 300,000 barrel per day crude oil refinery along South Africa’s east coast to come onstream by 2028, making it the region’s largest refinery, reported Hydrocarbonprocessing with reference to CEF’s acting group chief executive's statement.

Work on the project is still at an early stage, but indications are that it would cost in the region of USD10 billion, said Kholly Zono, adding this cost excluded the development of a related petrochemical complex at Richards Bay.

Former Saudi Energy Minister Khalid al-Falih announced the project in January, ahead of plans by Saudi Aramco, the world’s biggest oil firm, to list its shares.

"We are comfortable we have a very solid business case to attract investment and funding from bankers," Zono told Reuters on the sidelines of an oil and gas conference in Cape Town.

"This refinery will not only increase capacity for South Africa but also the region," he said, adding it would be funded through a mix of debt and equity.

A pre-feasibility study will be completed in the next few weeks, after which a more detailed feasibility study will firm up the design and capital cost estimates, followed by front-end engineering and design.

"We are looking at the refinery becoming operational by 2027/28," Zono said.

The new refinery would reduce the need for refined product imports and cement Saudi Arabia’s dominant position in South Africa’s oil sector. The Gulf kingdom already supplies around 40 percent of the crude oil consumed in South Africa, which is a net importer of petroleum products.

The refinery will be designed to accept other types of crude and produce fuel compliant with South Africa’s impending clean fuels regulations based on Euro V specifications, Zono said.

South Africa has talked about building a new refinery for more than a decade, but has struggled to find investors.

Africa’s most industrialised economy has six refineries, four using crude oil and two synthetic fuel as feedstock. Royal Dutch Shell, BP, Total and Sasol are among the major refinery operators.

Zono said the new refinery will not jeopardise the Mossel Bay gas-to-liquid (GTL) refinery operated by CEF’s subsidiary PetroSA, amid fears the plant could be shuttered.

South Africa’s national oil company, PetroSA, said in September its flagship GTL refinery could run out of domestic supplies by the end of 2020.

"The refinery in Mossel Bay will continue to operate and there is no intention to close it down," said Zono.

As MRC informed earlier, Saudi Aramco, which temporarily lost half of its oil production following the September 14 attacks on two key oil facilities, is running its local refineries at full capacity and is forging ahead with plans to start up new refineries. The company is also starting up a joint venture refinery in Malaysia next year. According to Aramco's bond prospectus released in April, the refining and petrochemical joint venture with Petronas - the Malaysian national oil company - collectively known as PRefChem, was supposed to start this year.

The PRefChem joint venture includes a 300,000 b/d refinery, an integrated steam cracker with capacity to produce 1.3 million mt of ethylene located in Johor, Malaysia. Aramco was supposed to provide a significant portion of PRefChem's crude supply under a long-term supply agreement. Jazan and PrefChem will help Aramco reach a gross refining capacity of 5.6 million b/d, it said in the prospectus. The company currently owns and has stakes in four refineries abroad with a total refining capacity exceeding 2 million b/d.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polyprolypele (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,589,580 tonnes in the first nine months of 2019, up by 7% year on year.  Shipments of all PE grades increased. The estimated PP consumption in the Russian market was 976,790 tonnes in January-September 2019, up by 4% year on year. Shipments of PP block copolymer and homopolymer PP increased.

Saudi Aramco is an integrated oil and chemicals company, a global leader in hydrocarbon production, refining processes and distribution, as well as one of the largest global oil exporters. It manages proven reserves of crude oil and condensate estimated at 261.1bn barrels, and produces 9.54 million bbl daily. Headquartered in Dhahran, Saudi Arabia, the company employs over 61,000 staff in 77 countries.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, PP block copolymer, homopolymer PP, propylene, ethylene, petrochemistry, Saudi Aramco, Malaysia, Russia, Saudi Arabia, South Africa.
Category:General News
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