Key facts about the Project Mthombo
PetroSA as a national oil company is developing the project with Sinopec as the anchor partner and IDC as the national funding partner.
- The project adds to the shareholder value and is strategically important.
- The 300 000 barrels per day refinery is technically feasible, strategically located and has a market for its products.
- This refinery is complementary to existing refineries.
- It will provide business opportunities for South African Liquid Fuels industry.
Background to the project
As part of ensuring shared growth and development, the Government has placed a strong focus on infrastructure development and industrial manufacturing capacity. The Presidential Infrastructure Coordinating Commission (PICC) has been established to coordinate and monitor the implementation of the National Infrastructure Plan. This Committee has identified 17 Strategic Integrated Projects (SIPs) to support economic development and address service delivery in the poorest areas and provinces. Project Mthombo has been identified as one of the critical infrastructure projects planned for the Eastern Cape region
(as part of SIP-3).
Project Mthombo supports the National Development Plan and its vision to create a competitive, energy-efficient industry that can grow and leverage the benefits of regional cooperation and trade. The project is informed by the underlying principles of IPAP-2 which are aimed at creating a good balance between import replacement and exports to reduce the balance of payments risk and improve on local supplier development; while increasing competitiveness in local procurement and support for BBBEE.
Project Mthombo is aimed at ensuring security of supply for the country by reducing importation of petroleum products and producing cleaner fuels. The project is expected to result in significant macro- and socio-economic benefits for the country.
PROJECT MTHOMBO – what it is and its role in the country
South Africa is facing persistent supply challenges, and PetroSA as a national oil company has a role of ensuring security of supply for the country. Current demand already exceeds the country’s current supply, leaving the country vulnerable to imports. Demand for transportation fuels is forecast to grow to more than 400 000 bbl/d by 2020 in South Africa. If there is no refining investment made, the country will have to import more than 200 000 bbl/d by 2020. Responding to this challenge, PetroSA assessed two refinery options - a crude refinery and coal-to-liquid (CTL) plant. The CTL plant (at 80 000 bbl/d) has an advantage of using indigenous resources, however compared to a crude refinery, it was found to present other serious challenges, which can be summarised as follows:
- Its small scale is not a sustainable solution for our growing demand,
- Will pose environmental challenges because of its significant quantities of CO2 emissions,
- Its water requirements are a huge challenge in a water-scarce country like South Africa,
- The project requires huge capital investments for a small scale refinery and it is economically unviable.
- It presents high project risks.
A crude refinery was therefore selected as a viable solution to alleviate the supply burden resulting from the demand growth. Project Mthombo - PetroSA’s planned 300 000 barrels per day crude refinery is the country’s solution to supply challenge aimed at reducing imports and producing refined products locally.
The refinery will be located in Coega IDZ near Port Elizabeth in the Eastern Cape Province. Conveniently located at the centre of heavy sour crude oil sources, Project Mthombo will be designed to process medium to high sulphur crude oils to minimise costs. These crudes are becoming widely available at a lower cost than low sulphur sweet crudes, but existing SA refineries are not designed to process these types of crude oils. Using advanced technology, Mthombo refinery will be able to convert these heavy crudes into high value products that comply with the Clean Fuels 2 requirements (Euro 5 standards) while ensuring minimum production of low value products.
Added to the above advantages of this refinery, the project will generate its own electricity and water. The refinery will include a utility island that will generate power for the refinery, with the balance sent to the national grid for distribution. With South Africa being one of the water scarce countries the refinery will utilise available technology to convert seawater via a desalination plant into useable water. The water from the desalination plant will be purified into portable water that can be used for domestic consumption and to process water that can be used at the plant to produce steam; used for fire fighting and cooling purposes.
Among other benefits Project Mthombo will:
- Create jobs and contribute to poverty alleviation in the Eastern Cape region;
- Contribute to housing development in Coega;
- Contribute to skills development for the community and the country in general;
- Create sustainable business development opportunities for small businesses through PetroSA’s competitive supplier development and BBBEE programmes;
- Create secondary industries that will benefit from existence of the refinery in the Coega region;
- Attract Investors into the Coega IDZ, positioning Coega and South Africa as an investment destination;
- Will reduce imports and result in savings in the balance of payments;
- Improve the country’s supply logistics and relieve congestion in Durban;
- Will produce high quality fuels that comply with Euro 5 standard