South Africa's Department of Minerals and Energy Thursday said private-sector players have applied to build new oil refinery plants in the country.

"For the first time new applications for refineries are coming in to the department," said DME Director-General Sandile Nogxina.

Nogxina said this follows a period where there was clearly a lack of appetite in the private sector to invest in energy infrastructure.

Up to 30% of South Africa's fuel demand is satisfied by synthetic fuel production from Sasol Ltd.'s (SSL) Secunda plant and PetroSA in Mossel Bay. The rest of the country's demand is met by crude imports and local refining.

According to the department's position paper on security of supply, crude refineries operating in South Africa are running almost at full capacity.

"By 2010 it is expected that refining capacity will be limited," the paper said.

The South African government is actively courting investment in the energy industry.

Latest estimates suggest that up to 1 trillion rand will be spent across the industry over the next 20 years, Nogxina said.

"What we need to do now is look at where there are changes in policy needed to accommodate the challenges faced by the sector and how we can implement our strategy better," said Nogxina.

He said the government was reluctant to keep changing the regulatory environment.

"We would like the regulatory environment to stabilize. It creates certainty about investing in the sector," Nogxina said.

One of the changes in policy may be the regulation of the coal sector.

In South Africa, 60% of the 300 megatons of coal produced every year goes to power generation while 23% supports petrochemical plants.

"Coal has unique role to play in meeting demand for secure energy supply in South Africa," said Minerals and Energy Minister Buyelwa Sonjica.

She said about 75% of the South African economy was coal-energy driven and was likely to remain so in the foreseeable future.

"Given this scenario, coal has become a strategic resource and factor in the energy equation," she said.

All energy minerals were fast becoming strategic, said Nogxina, who added that there were calls for the regulation of the coal industry in light of its importance to security of supply.

"Like uranium, we are going to need to look at how we deal with these minerals," said Nogxina.

In addition, the government said it was developing a renewable energy policy framework, which may include mandatory regulation and the establishment of financing mechanisms.

Aside from the subsidization of renewable energy projects, the DME is proposing a top-up feed-in tariff scheme.

This production-based mechanism could be financed by imposing a small levy of 0.1 cents to 0.3 cents per kilowatt-hour on electricity sales, the DME said.

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