YONELA DIKO: Depending solely on fuel imports threatens energy security

The series of oil refinery closures in South Africa in the past two years poses an energy supply risk and an unenviable position of being energy dependent. Engine, one of the leading energy companies in the country, closed its Enref refinery, a 120 000 bbl/d in December 2020. Glencore's Astron Energy refinery also shut its production in 2020, a refinery that at its peak processed 100 000bbl/d.

The latest closure of Shell and BP-owned Refinery Sapref in Durban which had a peak capacity of 180 000 bbl/d, a whooping 35% crude refining capacity of the entire country, becomes the latest blow in the countries refining capacity leaving the country with only one option, to import.

We are now left with the only worlds coal-based synthetic fuels refinery, Sasol's Natref, which has a peak day production of a 150 000 bbl/d, which is not enough to carry the entire country and replace the lost refinery capacity. We also have the ever so incapacitated PetroSA which is supposed to be a gas-to-liquid refinery in Mossel Bay which never seems to find any gas.

Closing down our own refineries in to depend on other countries is one way to guarantee our vulnerability in an increasingly uncertain world. As small as our refinery capacity has been, at 703 000 barrels a day (508000 bbl/d of crude, 195000 bbl/d of synthetic fuel), its constant presence guaranteed our ability to respond to both international disruptions and our local challenges without having to painstakingly wait for the next shipment.

Security of supply, despite what others say, is directly linked to the ability to process one's crude, at least if you are not an oil rich country. Transportation of petroleum products by sea already has many risks. Just the other day, when Durban was hit by floods, a shipment of hundreds of millions of litres in Illuminating paraffin and other products
could not dock at sea and had to wait for two weeks before it was clear to dock.

Depending solely on imports makes this risk even more consequential. It matters not how many overseas suppliers of crude you have access to, if you cant dock on your own ports for whatever reason or if the ship encounters problems at sea then you are undone.

Reason for fuel majors closing refineries

Like most infrastructure problems in South Africa, the major fuel companies have failed to continually upgrade their refineries and keep up with evolving technology so that these refineries are now badly aged and almost at the end of their lifespan, requiring billions of rand in investments for upgrade.

This makes the second challenge even more difficult to comply with. Effective September 2023, refineries must meet a set of new regulations on Petroleum Products Specifications and Standards which will require huge infrastructure upgrades at billions in added costs.

If the main reason for Sapref closure and other refineries is the cost implications for these new regulation then such concerns must be addressed. If the timeframe for implementation is not practical, again government must be engaged.

Unfortunately, the same time and resources it will require to upgrade refineries to meet new regulations will be the same time and resources it will take to build new storage capacity if Refineries closure continues. There will also be extra costs in billions needed to upgrade ports for the rising intake of shipments which will likely quadruple.

Our ports are already not the most efficient so more imports are just doubling down on the problem.

Importance of energy Independence

It is not even about whether the import route will be more or less expensive, its about security of supply which gives integrity to the entire energy supply system and more importantly, its about energy independence and the ability to survive through global disruptions and your own.

There is a reason America is today the worlds leading oil refinery nation, at 18.1 million barrels a day, after being strangled and pushed into panic in the 70s by Opec when oil supply became weaponised against them. China has also learnt that without energy independence, they would be vulnerable to the whims of oil rich countries so today, China processes 16 million barrels a day. America learnt the hard way that one cannot be a world leader if they are not energy independent or at least cannot survive for a prolonged period without needing others for survival.

While global refinery capacity is said to be at over 100 million barrels a day and throughput at 76 million barrels, that does not guarantee that such excess will be on our shores exactly at the time we need it, even if the excess continues to increase as alternatives to fuel emerge.

Consequences of refinery closures

Relying on imports alone means instead of importing a single product, crude oil, we will now have to import various petroleum product's into our various port storages in Durban, Richards Bay, Cape Town and others and this increased traffic and shipments will have its own added risks.

Depending on Imports for our petroleum needs means we are also exporting jobs to those countries we will be buying from whose refineries remain open and may well expand.

This increase in shipment traffic and frequency into our shores which will no doubt overwhelm the work of the Oil Spill Response Advisory Forum, which is already struggling with the current amount of ships and associated oil spillage. They will now not only have to deal with spillage of various petroleum products without knowledge of how they will affect ocean life, they will also have to deal with high number of ships if various sizes headed to different ports and shores.

Way forward

Petroleum products are a lifeline of the economy, from refining to transportation to consumption. A threat to supply is a strategic blow to a countries economic survival, a threat to livelihoods and to life.

There may well be no interest in energy security on the part of private major oil companies, especially because almost all of them are foreign owned. Government however must have an interest in the countries energy
security and through a renewed and recapitalised PetroSA must takeover these refineries and expand their capacity.

The reactionary approach to governing by the State, where there is no foresight and no long-term planning needs to stop. As the economy grows so do energy needs and government must take interest in ensuring that as the
economy grows and so does energy capacity. We cannot always react when something is broken.

Lastly, the oligopoly of major companies where the entire country is dependent on four or five major petroleum producers must be broken and more oil refineries must be licensed into the space. This should also help expand our refinery capacity.

Yonela Diko is the former spokesperson to the Minister of Human Settlements, Water and Sanitation. You can follow him on Twitter: @yonela_diko