The Petroleum Oil and Gas Corporation of South Africa (PetroSA), the country's state-owned oil company, has increased the size of a planned refinery at Coega near Port Elizabeth.

The plant, which will cost about $11 billion, will have a capacity of 400 000 barrels a day, rather than the previously proposed 250 000 barrels a day (kbpd). The board approved this increase on Thursday, after evaluating the conclusions of a recently completed pre-feasibility study undertaken by a leading US-based refinery engineering company, KBR.

The Coega refinery (known as Project Mthombo) will be the lowest cost producer in sub-Sahara Africa. This is due to economies of scale, proven world-class technologies and crude processing flexibility. "This will enable it to accomplish a balancing role and sustain a competitive advantage in open market conditions within both local and export environments while meeting the highest global standards of product quality and environmental responsibility," PetroSA Vice-President of New Venture: Midstream, Joern Falbe, said on Thursday.

"The design configuration to process a wide spread of feedstock, with prominence given to lower-cost heavy, sour and acid crudes, is the primary driver in maximising commerciality as well as security of supply." By 2014, when the refinery is due to be commissioned, South Africa will already be experiencing a shortfall of locally refined product of about 200 000kbpd. This will be due to its projected economic growth and low investment in existing refineries. This shortfall will be met by importing product - an expensive solution that has a major impact on foreign exchange and increases potential supply vulnerability.

PetroSA's original base case of a 250kbpd crude refinery on the east coast of South Africa proved robustly attractive to meet the country's medium term fuel growth requirements.

However, acknowledging the National Oil Company's mandated role to reduce external dependency in national energy security requirements, combined with input from potential international partners who recognize the flexibility of Coega to supply diverse markets and mitigate risk, the Board of PetroSA has approved expanding the planned refining capacity to 400kbpd.

"After evaluating all operational, logistical and environmental considerations, 400kbpd was deemed the most suitable configuration," said Mr Falbe. He added that this increase from 250 to 400kbpd increased project funding. "However, due to the economies of scale, the investment cost per barrel reduces by 20 percent and operating costs improve by 30 percent, boosting the original project economics substantially.

"A recently-completed logistics study has confirmed that crude supply in 'VLCCs' [very large crude carriers] via a SPM [Single Point Mooring] is technically and operationally feasible, and PetroSA now awaits the outcome of an environmental and engineering analysis to determine the most suitable location for the facility," said Mr Falbe.

The positioning of this highly competitive, world-class mega refinery will help to diversify crude and product supply structures in South Africa by providing an essential strategic supply alternative to the country's main inland markets.

A future product pipeline from Coega to Gauteng, commercially viable, becomes a justifiable reality in the medium term. Fast track project projections indicate that the streaming of Coega remains on target for 2014.

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Related Project
Project Mthombo
Facility Type: Refinery Owner: PetroSA
Scope: New Construction Location: Coega South Africa