Earlier this year, the DoE (Department of Energy) indicated it would announce its decision on the road map to cleaner fuels before the end of December. The oil majors, through its industry association (SAPIA), submitted its proposals for consideration by government. The key question is undoubtedly, how much is it going to cost to refurbish and upgrade the local refineries and who is going to pay for it?
In this regard, the oil majors are not free to make a decision without the co-operation and participation of the government who regulate the fuel industry. The cost to upgrade the local refineries, as previously reported, is hugely expensive running to many billions. Government has the unenviable task to decide on how best to balance the need to produce cleaner fuels in South Africa versus importing refined fuel from various potential long term suppliers. Petro SA, a state owned enterprise, is keen to build a new 400 000 bpd refinery near Coega in the Eeastern Cape , also at a cost of several billion rands.
The decision must take into account future fuel security, the merit, if any, in South Africa becoming a net exporter of refined cleaner fuels and the job creation opportunities associated with building a new refinery and upgrading existing ones. Alternatively, imported fuel presents major logistics considerations including availability of bulk storage facilities and transportation from ports to depots and major users. Either way or, a combination of both solutions, access to cleaner fuels via a nationwide distribution network is a long way off.
This presents complex choices for the motor industry in terms of what and when to introduce more fuel-efficient and cleaner vehicles to the local and regional markets. In addition, a reduction in the carbon footprint and other green house gases will remain on the back burner for the best part of a decade before sufficient Euro 4, 5 and 6 compliant vehicles are on our roads. In the meantime, our lagging behind may well attract a host of Asian cheapies better suited to Euro 2 and 3 technologies and our 500 ppm diesel.