Discussions between South Africa’s oil companies and the Department of Energy on a programme and timelines for upgrading refineries to make lower-sulphur fuels are to continue to the end of 2017, South African Petroleum Industry Association (Sapia) executive director Avhapfani Tshifularo said on Wednesday.
This will be unwelcome news to the automotive industry. The original target date to upgrade refineries to make fuel with a maximum of 50 parts per million (ppm) sulphur to meet the specifications of modern car engines was July 2017.
That date has been discarded as industry and the government have been unable to agree on how refineries will be able to recover their investment, estimated to be at least R40bn.
Tshifularo was answering questions at the presentation of a KPMG report commissioned by Sapia on the petroleum industry’s broad economic impact in SA.
The report showed that refining activities were the most important part of the value chain, contributing R212.6bn to gross domestic product (GDP) and 486,478 direct and indirect jobs in 2014. The second-biggest contributor was retail activities, which contributed R80.2bn to GDP and 221,580 jobs.
KPMG’s study covered only the eight integrated companies that are members of Sapia: BP SA, Shell, Sasol, Chevron, Engen, Total SA, SAPREF and PetroSA. In total, they sustained about 700,000 direct and indirect jobs in 2014 and accounted for R324bn or 8.5% of the country’s GDP.
In that year, these companies generated R200bn in revenue and invested R9.7bn in infrastructure. They contributed R70.2m to community social investment, of which R27.4m was to educational projects.
KPMG senior economist Jeaunes Viljoen said if these companies maintained their current levels of spending on infrastructure and operations, every R1 spent would add another R1.57 to GDP and 38c to national government revenue. For every additional R1m invested, four jobs were created.
The impacts took into account direct effects such as purchases of goods and services, indirect effects such as consumption of water and electricity and insurance payments, and induced effects from spending by employees.
Asked what effect deregulation of fuel prices would have on these figures, Sapia chairman Maurice Radebe said it was likely to lead to cost-cutting, in particular the loss of about 55,000 petrol forecourt jobs. Each of those employees supported between three and six people.
Tseliso Maqubela, the Department of Energy’s deputy director-general of petroleum and petroleum product regulation, said one option could be to deregulate the sector while prohibiting self-service on petrol forecourts. "But we are not there yet. We will look at the study and engage with it."
This is the first time Sapia has commissioned a study on the broad impact of the petroleum sector on the economy.
Maqubela said it would help the department to understand the effects of policy proposals and he urged Sapia to follow the study with another one on the impact of petrochemical activities.
In the next fortnight, the energy minister will release a portion of the Integrated Energy Plan, which will lay out the options for the liquid fuels sector in future, he said.
Tshifularo said the study was not intended to respond to specific issues facing the sector but to provide broad information about the petroleum industry value chain in SA for researchers and policymakers. Sapia would not repeat this study annually but it might be worth charting industry progress every five to seven years.
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