The KwaZulu-Natal provincial government is in talks with the energy department about buying Sapref, SA’s biggest oil refinery, whose future hangs in the balance after its private sector owners said they would put operations on hold indefinitely from next month.
“We are of the firm view that retaining refinery operations in our province is key for economic growth and job creation rather than solely relying on importing refined oil,” said KwaZulu-Natal premier Sihle Zikalala. “For that reason, we have called on national government to buy Sapref.”
Zikalala’s comments at the state of the province address come as Business Day’s reporting finds growing anxiety about the security of supply in the region after Sasol — in a letter obtained by the newspaper and addressed to petrol stations — sounded alarm bells over “potentially escalating” reliability challenges.
The letter, whose authenticity was confirmed by Sasol and is dated February 22, reads: “Sasol is aware of the emerging and potentially escalating challenges relating to reliability in the supply at the coast.”
Sapref, which has a capacity of 180,000 barrels per day and accounts for about 35% of the country’s refinery capacity, is jointly owned by oil majors BP and Shell, which have been in a dispute with the government over the timing of the introduction of new rules meant to reduce sulphur emissions from 2023.
Two weeks ago, Shell and BP announced a hold for an “indefinite period” of operations at Sapref, but did not rule out a possible restart in the future, including any future sale.
While the joint venture said the decision would have no impact on full-time employees, organised labour warned of severe economic losses and Zikalala said bringing the refinery into the fold as a state-owned company was crucial.
“We wish to update the people of KZN that the provincial government has already met with Sapref and we have started engaging with the department of minerals & energy to work towards taking over the full operations of Sapref as a state-owned oil company. That is in progress,” he added.
When contacted for comment, Sasol said “it was aligned to the changes in the refinery operations landscape that has occurred recent years”.
“We continue to work with stakeholders to ensure continued supply products both inland and at coast,” said Matebello Motloung from Sasol’s press office.
Organised business on Thursday called for Sasol to implement urgent restocking plans to avert a widespread fuel shortage in the country.
“There is a concern with regard to availability of petroleum products as the market adapts to the changing supply environment,” said Solly Suleman, president of the Minara Chamber of Commerce.
He said a fuel price hike will increase demand before the hike kicks in. “Many service stations will run out of fuel unless plans are in place to restock quickly and efficiently. We believe that this will resolve itself over a period of time when suppliers and retailers adjust to the closure of Sapref.”
During the state of the nation debate last week, mineral resources & energy minister Gwede Mantashe called the decision to shut Sapref indefinitely akin to “arrogance”.
“Related is the greed and arrogance of certain petroleum entities that want to shut local refineries and import the product. This is something that will cause job losses to our people, cost our economy dearly, and lead to uncertainty of supply. For our national and economic security, we are taking drastic measures in this regard.
“Energy security is critical for economic reconstruction and recovery, particularly for a developing economy like ours, that seeks to industrialise,” Mantashe said.
For decades environmentalists have lobbied against the pollution linked to the Sapref refinery. Several independent health studies allege that the prevalence of cancer in South Durban’s nine communities next to the refinery was 24 times higher than in other parts of the country.
The South Durban Community Environmental Alliance, which represents more than 20 community and environmental bodies, called Zikalala’s announcement a “betrayal” for the community.
“Our KZN government should have consulted with the community before taking this decision. There is an urgent need to proceed with a just transition so detoxification can begin with the community,” said alliance co-ordinator Desmond D’sa.
Update: February 24 2022
This story has been updated with comment from Sasol and new information.
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