Infrastructure


US firm wins Coega refinery contract

9 December 2008

State-owned petroleum and gas company PetroSA has appointed US firm KBR as the engineering contractor for its planned US$11-billion (about R112-billion), 400000 barrel-per-day crude oil refinery at the Coega industrial development zone outside Port Elizabeth.

KBR will carry out the feasibility studies, as well as the front-end engineering design for the refinery, which is expected to come into production in 2014, becoming the largest refinery on the continent.

PetroSA CEO Sipho Mkhize said the Houston, Texas-based firm was appointed because of the quality and expertise of its management, its proven mega-refinery expertise in the petroleum industry, and its commitment to the project.

"The appointment of KBR as an engineering partner follows the selection of other world-class organisations such as HSBC as financial advisors, KBC as technical advisors and PFC as marketing advisors, to ensure that every aspect [of the project] meets global best practice," Mkhize said in a statement this week.

According to an Engineering News article this week, the contract is estimated to be worth about R1-billion.

Local development, skills transfer

The contract also includes aspects such as skills transfer, the development of empowered suppliers, and opportunities for local equity partnerships, in line with the industry's Liquid Fuels Charter.

"We are also delighted that KBR has shown full commitment to working with PetroSA to achieve goals of transformation of the local petroleum industry," Mkhize said.

KBR Downstream president John Quinn welcomed the appointment, saying the company would work closely with PetroSA to develop a competitive supplier development programme plan to maximise the project's contribution to local economic growth, employment creation, skills development and black economic empowerment.

"KBR is pleased to continue its successful partnership with PetroSA, offering our expertise in designing this world-class facility," Quinn said.

Fuel security

Mkhize explained that the refinery would play a major role in securing South Africa's future fuel supplies, with nation demand for refined fuels already exceeding the country's refining capacity.

With diesel consumption forecast to grow at 6% and petrol at 2% per annum between 2009 and 2020, PetroSA estimates that by 2015, South Africa will have to import 10 billion litres of refined fuel per annum about 200 000 barrels per day, or about 20% of the national requirement if there was no significant investment in local refining capacity.

"Importing this much refined fuel will have a negative impact on the country's foreign exchange reserves and makes national supply very vulnerable to external factors," Mkhize said.

The feasibility phase of the project will be concluded by September 2009, and final board approval for the investment will be sought in late 2010, after which construction will begin.

The project, if approved, is expected is expected to also give the Eastern Cape economy a much needed boost, as it is expected to create about 25 000 direct and indirect jobs.

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