South Africa’s Faces Major Oil Refinery Crisis

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South Africa’s Faces Major Oil Refinery Crisis

Two of South Africa’s four oil refineries are currently offline and expected to restart next year at the earliest, while the other two facilities also face an uncertain future as oil companies are reassessing their downstream portfolios in the wake of the pandemic that crushed fuel demand.

Two South African oil refineries, owned by units of Glencore and Malaysia’s Petronas, are forecast to remain closed at least until next year, Bloomberg reports, citing energy consultancy CITAC. Those two refineries account for 43 percent of South Africa’s total oil refining capacity of over 500,000 barrels per day (bpd).

Glencore’s Astron Energy shut down its refinery in July after an explosion and fire killed in early July two workers and injured another seven. In September, Astron Energy said it was still “too early to determine” when the 100,000-bpd refinery could be safely restarted.

Engen Holdings, a unit of Petronas, stopped operations at its 120,000-bpd refinery last month after a fire erupted at the facility.

The future of the other two refineries in South Africa, Sapref of a BP-Shell joint venture and Sasol’s Natref, may also be uncertain, considering that oil majors, including Shell and BP, are reassessing their asset portfolios.

Shell said two months ago it would halve the crude oil processing capacity of its largest wholly owned refinery in the world, Pulau Bukom in Singapore, as part of its ambition to be a net-zero emissions business by 2050 or sooner. Shell is also shutting down its 211,000-bpd refinery in Convent, Louisiana, after failing to find a buyer for the site.

In the wake of the pandemic which crushed fuel demand, refiners around the world started announcing permanent closures of refinery capacity last year, but significant overcapacity still remains, the International Energy Agency (IEA) said in November. Permanent shutdowns of refinery capacity have reached 1.7 million bpd. But more than 20 million bpd crude oil distillation capacity was sitting idle as of November, the IEA said, noting that “there remains significant structural overcapacity.”

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