Read part two of this article here.
Crude imports and processing
With such a small domestic crude oil industry, South African refiners depend on imported crude feedstock. Crude import volumes are typically in the vicinity of 400 000 bpd, falling as low as 362 000 bpd in 2011 and rising as high as 508 000 bpd in 2009. In 2014, South African crude imports averaged 431 000 bpd. OPEC countries are the main suppliers, led by Saudi Arabia, Nigeria and Angola. Iran had been a key source of crude imports, but South Africa cut these imports in order to comply with international sanctions. Now that the sanctions have been lifted, there are plans to resume imports of Iranian crudes.In the earlier years, reducing crude import dependency was one of the key motivations behind the development of the CTL and GTL industries. Because the CTL and GTL plants are such an integral part of South Africa’s fuel supply, they are typically listed as refineries. The Sasol plant is given a nameplate capacity of 150 000 bpd oil equivalent, and the Mossgas plant’s nameplate capacity is 45 000 bpd oil equivalent, but it is currently rated at 36 000 bpd crude equivalent.The construction of traditional, crude-based refineries was not encouraged, though investments at the existing refineries were needed in order to meet tighter specifications for product quality.
South Africa’s total crude capacity is 518 500 bpd. As noted, there is a plan known as Project Mthombo to build a grassroots refinery. It is envisioned as a 300 000 bpd full conversion plant, geared toward Middle Eastern sour crudes. At that time, the government was growing more concerned about the rising level of gasoline imports, and was resigned to allow a higher level of crude imports in order to have greater refined product self-sufficiency and to capture value from having a new refinery complex built.
Plans to build the Project Mthombo refinery were based partly on the perceived need to reduce dependence on imported gasoline. The market has changed since the plans were initiated, however. As noted above, the demand pattern has shifted away from a gasoline dominated demand barrel to a diesel dominated structure. In 1994, gasoline had accounted for 54% of the six key fuels, while diesel had accounted for 29%. By 2014, however, gasoline’s share had fallen to 40%, and diesel’s share had risen to 47%.
In 2007, gasoline imports were 29 600 bpd. They rose to 42 300 bpd in 2011, and many forecasts expected that this trend would continue upwards. Instead, gasoline demand grew slowly, and imports were cut by more than half, from 42 300 bpd in 2011 to 20 100 bpd in 2014. In contrast, diesel imports were 47 500 bpd in 2007, and they declined to 39 400 bpd in 2009. From 2009 to 2014, however, diesel imports began to grow, and they averaged 85 100 bpd in 2014.
SAPIA summarised the product balance for gasoline, diesel and jet fuel for 2014. Refinery production of gasoline was 180 600 bpd. Demand was 195 500 bpd. The shortfall was 14 900 bpd. Kerosene/jet fuel production was 50 100 bpd, slightly above demand of 47 500 bpd, resulting in a surplus of 2600 bpd. Diesel production was 157 900 bpd, versus demand of 226 900 bpd. The net shortfall was 69 000 bpd. This constitutes a sizeable portion of total demand. It also changes the outlook for the possible grassroots refinery, since building a diesel maximising refinery is more costly than building a gasoline maximising refinery. The new refinery is not yet firm, nor is its downstream configuration, but if the refinery is intended to satisfy local requirements, it would have to be a full conversion hydrocracking refinery capable of producing a full output slate of Euro standard fuels, and this will be a costly venture.
South Africa’s oil and gas industry has a unique history, constantly overshadowed by the coal industry, and, in fact, having coal as a key source of gas and liquids. The Apartheid era forced the industry to operate in growing isolation from the rest of the world. This fed the country’s determination to seek self-sufficiency in its energy supply. South Africa soon led the world in CTL and GTL technologies, and its expertise has contributed to other commercially successful plants around the world. But the next wave of CTL expansion in South Africa has been stymied by concerns over coal use and carbon emissions.Additional GTL projects are stymied by a lack of commercially successful natural gas fields. Shale gas reserves are huge, but capital and water intensive projects are not likely in the near term, while very little conventional crude oil has been found and successfully developed. So the country is at a crossroads in terms of deciding what types of energy investments will best meet its future needs.
In the near term, with global crude oil prices at a low ebb, South Africa appears resigned to let import dependence rise once again. The advocates of grassroots refinery expansion believe that relying on crude imports will be preferable to relying on refined product imports. The economics are not clear, however, because global refinery capacity is ample at this point in time. South Africa is far from most major refining centres, however, and must source its gasoline and diesel from distant ports. The choices are all capital intensive: new offshore oil and gas field developments, a new full conversion refinery, new CTL, new GTL, new shale gas, new pipelines, and so forth. None seem to make immediate economic sense in today’s market. South Africa, however, has in the past shown determination to improve its energy self-sufficiency, so it would not be surprising to see the country take action to further develop its oil and gas industry.
Read the article online at: https://www.hydrocarbonengineering.com/special-reports/07062016/south-africas-energy-diversification-part-three-3440/