---

PetroSA increases future Coega capacity

26 May 2008

The state-owned Petroleum Oil and Gas Corporation of South Africa (PetroSA) has increased the capacity of its planned crude refinery at the Coega Industrial Zone near Port Elizabeth from 250 000 to 400 000 barrels per day, with the plant now costing US$11-billion.

The company's board approved the increase last week after evaluating a pre-feasibility study conducted by leading US-based refinery engineering company KBR.

The Coega refinery will be the lowest cost producer in sub-Saharan Africa due to economies of scare, use of proven world-class technologies and crude processing flexibility.

"This will enable it to accomplish a balancing role and sustain a competitive advantage in open market conditions within both local and export environments while meeting the highest global standards of product quality and environmental responsibility," said new ventures vice president Joern Falbe in Port Elizabeth last week.

"The design configuration to process a wide spread of feedstock, with prominence given to lower-cost heavy, sour and acid crudes, is the primary driver in maximising commerciality as well as security of supply."

According to the company, South Africa will already be experiencing a shortfall of locally refined products of about 200 000 barrels per day by the time the refinery is commissioned in 2014, due to the country's projected economic growth and low investment in existing refineries.

This shortfall will be met by importing products - an expensive solution that has a major impact on foreign exchange and increases potential supply vulnerability.

Energy security and independence

Though the refinery's original capacity of 250 000 barrels per day originally proved sufficient to meet demand, the company decided to increase capacity in light of its mandate to reduce South Africa's external dependency of energy and investment from potential international partners who recognised the ability of the refinery to supply diverse markets and mitigate risk.

"After evaluating all operational, logistical and environmental considerations, 400 000 barrels per day was deemed the most suitable configuration," Falbe said. "However, due to the economies of scale, the investment cost per barrel reduces by 20% and operating costs improve by 30%, boosting the original project economics substantially."

Falbe said that a recently-completed logistics study had confirmed that crude supply in very large crude carriers via single point mooring was technically and operationally feasible, and PetroSA was awaiting the outcome of an environmental and engineering analysis to determine the most suitable location for the facility.

The positioning of this highly competitive, world-class mega refinery would help diversify crude and product supply structures in South Africa by providing an essential strategic supply alternative to the country's main inland markets.

A future product pipeline from Coega to Gauteng, commercially viable, also becomes a justifiable reality in the medium term, he said.

Source: BuaNews