South African integrated Sasol and its joint venture partner Total are considering selling or closing their 107,000 b/d Natref refinery at Sasolburg, in the Free State province.
The firms have concluded that making the refinery compliant with South Africa's pending Clean Fuel 2 regulations is not financially viable, because current margins make the investment needed to make Natref's product slate compliant "sub-economical," Sasol's chief financial officer Paul Viktor told Argus. It will cost 6bn rand ($400mn) to make Sasol's 160,000 b/d coal-to-liquids (CTL) Secunda refinery meet clean fuel standards, and converting Natref will cost much more, Viktor said.
"That is not going to happen. We are not going to put that money in at that quantum, only to not make a return on it," he said.
An option is to turn Natref into a storage and blending facility that could meet the firms' future needs, he said. The multi-product pipeline that serves the refinery could be used to import products to the inland depot.
Natref may be needed to blend products to certain specifications to supply Secunda, which Sasol will position to achieve its green hydrogen ambitions. Beyond 2030, the firm plans to use green hydrogen and its proprietary Fischer-Tropsch technologies to produce sustainable aviation fuel (SAF) and chemicals, among other things.
If it turns out that using Natref as a storage and blending plant also is not financially viable, then selling it is the next option, Viktor said. If no buyer can be found then the plant would be closed. Sasol expects to make a decision on Natref in the next couple of months.
The South African government first mooted a plan to meet Euro 5 emissions standards, which require sulphur levels in gasoline and gasoil be cut to 10ppm, in 2012. Local specifications currently match Euro 2 standards. The shift has been held up by industry demands for compensation to cover the cost of the expensive refinery upgrades that will be necessary to produce these cleaner fuels.
Sasol owns 63pc of the Natref refinery, and Total owns 27pc. South Africa's other refineries are Astron Energy's 110,000 b/d Cape Town plant, the 180,000 b/d Durban facility operated by the BP-Shell joint venture Sapref, and Engen's 105,000 b/d Durban refinery. The latter will be converted into an import terminal by 2023.