Johannesburg - A projected slowdown in the growth of South Africa's petroleum demand will give the refinery sector time to build up its capacity to avert a repetition of past shortages, a top industry official said.
South African Petroleum Industry Association (SAPIA) chairperson James Seutloadi said he expected demand to be close to unchanged in 2009 from 2008 and receive a slight boost only from projects related to the soccer World Cup next year.
"If you take infrastructure and development projects related to the World Cup out of the equation, demand could be close to flat this year," he told Reuters in an interview on Tuesday.
Demand for petrol dropped more than 10% in the third quarter of 2008 compared with the same period the previous year, while demand for diesel was down more than 3%, as big industrial consumers scaled down operations due to the global economic slowdown.
The drop will serve as a buffer for South Africa, which has battled a capacity shortage in recent years, especially when refineries were forced to shut down unexpectedly.
In the first nine months of 2008, sales of major petroleum products in South Africa amounted to 18.9bn litres, according to Sapia figures.
"We have sufficient refining capacity right now and the slowdown has helped, but come 2015, we should begin to feel the squeeze," Seutloadi said.
Relief will come if the 400 000 barrels-per-day (bpd) Coega oil refinery, built by state-owned PetroSA, comes on stream as planned in 2014.
It would nearly double the current refining capacity, which Seutloadi estimates at around 460 000 bpd.
Growth prospects
Half of Coega's output is expected to supply sub-Saharan Africa and Seutloadi said the long-term growth expectations in the region gave good reason for other oil companies to invest further in expanding capacity.
Oil majors involved in South Africa include Royal Dutch Shell Plc, BP, Total, Chevron and South Africa's petrochemicals group Sasol.
Seutloadi, who is also Chevron's Chairman for Africa, said his company has no intention of leaving South Africa as has been reported by some local media, but is instead planning to expand in the region.
"We have no intention of disposing of our South African refinery... our strategy is not only to remain in South Africa, but also to considerably grow in this market," he said.
Seutloadi said that while a solution for the refining capacity was in sight, the frail infrastructure could prove a major challenge for the sector and requires more investments than has been planned by state-owned Transnet.
"In the interest of security of supply, there is a need to involve the private sector and individual entrepreneurs... Transnet cannot do it alone," he said.
The introduction of new fuel emission standards, known as the Euro 4, by 2012 will pose another difficulty for oil companies that are struggling to raise the capital needed to upgrade existing facilities in the current tight credit market, he said.
A postponement to the rule or another alternative might need to be found, he added.
- Reuters