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South Africa-China refinery pact signed

22nd May 2012

South African company teams up with Chinese oil giant for new refinery

China has set aside USD 20 billion to invest in South Africa's energy sector

South African national oil company PetroSA has partnered with China's Sinopec Group to push along the building of its Coega refinery, originally slated to cost USD 9-USD 10 billion and produce 400,000 barrels a day.

The Mthombo project, in the industrial port of Coega near Port Elizabeth on South Africa's south coast, has been in the pipeline for several years but progress has stalled mainly because of a lack of funding.

"The agreement defines the process by which PetroSA and Sinopec will shape the business case for Project Mthombo, the initiative to construct a world-class crude oil refinery at Port Elizabeth's Coega Industrial Development Zone," PetroSA said.

The first phase of the agreement will focus on building a business case for the plant, and the second will consider engineering and design, it added.

Sinopec, China's second-largest oil and gas producer, is expected to complete both studies over the next 18 months.

China has set aside USD 20 billion to invest in South Africa's energy sector, part of its growing presence on the continent.

Two years ago, acting PetroSA chairwoman Linda Makatini told Reuters the firm was in talks with Sinopec and was looking to sell an equity stake of up to 30 per cent in the refinery, which will be among the largest in sub-Saharan Africa.

Papers seen by Reuters suggest PetroSA is trimming the originally planned capacity of the plant to reflect domestic demand and possibly to reduce its price tag.
South Africa is a net importer of crude, most of it from Iran and Saudi Arabia.