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Only 2500 jobs at the planned PetroSA refinery

Posted On Sunday, 24 October 2010 02:00 Published by eProp Commercial Property News
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PetroSA's controversial R78-billion Mthombo refinery, planned for the Coega industrial development zone near Port Elizabeth, will create no more than 2500 permanent refinery jobs once it is operational, a far cry from the 27500 President Jacob Zuma envisaged.

Jacob ZumaWhile Zuma praised the 360000 barrel-per- day project during a PetroSA visit last week for its potential to create 27500 jobs, a spokesman for state-owned PetroSA said this week only 1000-2500 would be created "depending on the operational philosophy of the refinery".

A feasibility study found the project had the potential to create another 16000 direct and indirect jobs, the spokesman said.

Up to 27500 jobs might be created in the construction phase. The project, which will depend on imported oil, still needs cabinet approval to go ahead with front-end engineering design and an environmental impact study.

The energy minister, Dipuo Peters, said in a written reply in parliament this month that the request for approval, signed off by PetroSA's board in February, would be tabled soon at the cabinet. "The feasibility studies indicate the project is strategically important, adds shareholder value and is technically feasible."

But concern remains over its commercial viability, particularly because, due to the project's scale, it will dwarf existing refining capacity and threaten the viability of private sector players. In addition, Mthombo will rely on exporting internationally, where a surplus of refining capacity exists. Sasol has indicated that if Mthombo is approved, it will not go ahead with its Limpopo coal-to-liquids Mafutha project.

Tim Harris, DA shadow minister of trade and industry, said: "This would represent an alarming crowding-out of private sector investment by the public sector. It would also represent the prioritisation of a project that would import foreign crude oil over one that would beneficiate South African coal, a decision out of step with our stated and correct intention of scaling up beneficiation of local resources in South Africa."

Mthombo's cost estimate of R78-billion does not include costs for related projects, including building a power station, port expansion and product pipeline. One big concern is transporting fuel from Coega to Gauteng, main market for its products. The "base case" option was to ship products from Coega to Durban for transmission through existing infrastructure to Gauteng, the spokesman said.

It is feared that PetroSA may be unable to run the project profitably and that tax money will eventually be used to keep Mthombo operational. PetroSA posted a R1.34-billion operating loss this year (2009: profit of R219-million), said its annual report issued this week.

Revenue fell 33% to R8-billion. Cash generated from operating activities fell 72% to R392-million. A net loss of R356-million was recorded (2009: net profit of R1.9-billion.)

Big costs this financial year include exploration expenses of R500-million in Equatorial Guinea, where commercially exploitable hydrocarbons are yet to be found, fruitless and wasteful spending of R15.15-million and a R235-million write-off of an intercompany loan to PetroSA Sudan. The auditor-general expressed concern over the recoverability of other intercompany loans of R1.25-billion.

PetroSA blamed poor performance on falling gas production, reduced international oil prices and the maintenance shutdown of its Mossel Bay refinery for more than a month last year.

During his visit last week, Zuma praised Mthombo's promise to save the country R12.6-billion a year in energy costs. PetroSA said it had cost advantages to produce liquid fuels in SA rather than importing refined product.

The primary source of savings was the refining margin and the deep conversion refinery configuration "which allows the dirtiest, heavy crude to be processed".


Last modified on Wednesday, 14 May 2014 20:34

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