The South African government plans to repair and expand the closed 180,000 b/d Sapref refinery in Durban, in the KwaZulu-Natal province, creating a facility with at least 600,000 b/d of capacity, according to the Central Energy Fund (CEF).
State-owned CEF struck a deal in May to acquire Sapref from BP and Shell.
The government wants to upgrade the refinery to ensure that South Africa has security of supply, CEF group chair Ayanda Noah told delegates at the Africa Energy Week underway in Cape Town.
"Nowadays, a refining capacity of 600,000 b/d upwards is more economical, and that is what South Africa is aiming for," Noah said. "We are very ambitious."
Sapref was South Africa's largest oil refinery with around 35pc of the country's refining capacity before it was shut in 2022. That followed the closure of Engen's 105,000 b/d Durban refinery in 2020.
Only three of South Africa's refineries remain operational — Astron Energy's 100,000 b/d Cape Town refinery, Sasol and TotalEnergies' 107,000 b/d Natref refinery and Sasol's 150,000 b/d coal-to-liquids plant at Secunda.
South Africa now only has 35pc of its original refining capacity left, which means it has to import the balance, according to Noah.
"You cannot outsource security of supply," she said. "There are many other variables that are outside our control. Look at the geopolitical tensions up north that affects supply chains negatively."
Importing around 65pc of oil products is not efficient, especially given South Africa's high unemployment rate, Noah said. "Essentially, what we've done, is export downstream jobs."
There is also a negative impact on the balance of payments and the economy, because South Africa cannot control prices, Noah added.
It is the role of the CEF as a state-owned company to assist when there are market failures, she said.
BP and Shell each owned a 50pc stake in the refinery and were looking to sell the facility after halting operations in 2022. But these plans were set back after extensive flood damage at the plant in April of that year, only two months after it was shut indefinitely.
Four years ago, UK-based consultancy Citac estimated it would cost around $15.7bn to upgrade all of Africa's refineries to Afri-6 clean fuel standards, its chief executive Gary Still said in an interview. But those calculations were made before Sudan's 100,000 b/d Khartoum refinery was shut and Ghana's 120,000 b/d Sentuo refinery came online, Still said.
It is also likely that the cost of refinery upgrades has increased substantially as goods and services became more expensive after the Covid-19 pandemic, while engineering firms and personnel with the necessary expertise are less available, Still said.
By 2030, the African Refiners and Distributors Association (ARDA) wants African countries to meet Afri-6, which imposes a 10ppm sulphur limit on gasoline and diesel, in line with Euro 5 fuel specifications.
ARDA's executive secretary Anibor Kragha, described the Sapref acquisition as "phenomenal," because South Africa is "claiming its energy independence through it," he said.
