South Africa deferring tighter fuel specs could prop up refineries

South Africa's decision to defer implementation of more stringent gasoil and gasoline specifications to 2027 could provide a lifeline to the country's refineries, according to downstream energy consultancy CITAC.

The introduction of a 10 ppm sulfur content cap and 1% benzene limit in gasoline has been delayed to July 2027 from September 2023, according to the official national gazette.

Current gasoline specifications are 150 ppm and 5% benzene, whereas for the two grades of gasoil they are 500 ppm and 50 ppm, respectively.

The four-year extension of the Cleaner Fuels 2 or CF2 deadline "may persuade" the owners of the Natref refinery "to keep the refinery running in the short to medium term at least, even if they decide against investment required to extend the refinery's operating life beyond 2027," CITAC said.

Furthermore, the extension could help find a buyer for the Sapref refinery, which was mothballed earlier this year.

"One obstacle to the sale of Sapref is the fact that it needs investment to bring it in line with the new specifications," CITAC said.

Refinery woes

In early 2022, Sapref halted operations, for "an indefinite period", although shareholders BP and Shell did not rule out a possible restart should the refinery be sold.

It was the second refinery in Durban to shut down after Engen decided in April 2021 to convert its refinery there into a terminal as it was "not financially viable". The refinery has been shut since a fire and explosion at the end of 2020.

Meanwhile, Astron Energy Cape Town refinery, which has been halted since an incident in July 2020 involving an explosion and fire, was expected to restart in the second half of 2022.

As a result, South Africa relies on imports to cover a lot of its demand.

There are monthly buy tenders for 500 ppm gasoline, 10 ppm diesel and 50 ppm gasoil.

Talking about the state of refining industry in South Africa and why the country was becoming more dependent on imports, a source at South Africa's Central Energy Fund said there were three issues: a "rule" on import parity where product would be imported if less costly than local production, the lack of storage capacity in the country and the lack of refinery capacity.

"We need investment to build capacity," the source said.