Inviting regional players to invest in a planned 400,000 barrel-a-day oil refinery was a good idea, but the scale of funding needed could frighten off potential investors, says an energy analyst.
Energy Minister Dipuo Peters this week said the government was looking for regional investment in national oil and gas company PetroSA's planned crude oil refinery in Coega, near Port Elizabeth. Peters said this would be in exchange for fuel supplies.
Peters' comments are an indication that the government has been mulling over the funding of the 9bn refinery in what have become extremely difficult global market conditions.
PetroSA is yet to disclose details of its funding plan for the project. The company's senior executives last month said financing and funding plans were difficult to conclude while the feasibility study was still being done. According to PetroSA, the feasibility study, due for completion in September, would give clarity on the most suitable funding options for the company.
PetroSA vice-president for corporate strategy and planning Godwin Sweto said though liquidity in the market was scarce, investors were on the lookout for quality projects such as Project Mthombo, as the world-class crude oil refinery will be known.
Speaking at an energy conference in Cape Town on Monday, Peters said: "We are exploring the possibility of making this facility a regional facility by attracting investments from the neighbouring countries in return, among others, for greater security of fuel supply."
Frost & Sullivan energy analyst Cornelis van der Waal on Tuesday said getting investors from the southern African region was a "wonderful" idea. But the amount of money needed could be a turn- off, he said. "This is a big project, requiring big money. I do not know how many investors out there have an appetite for a project such as this. So in reality, government may struggle to get investors on board," Van der Waal said.
An easier option for the government would be to go for multiple shareholders. "That would spread the risk and increase accountability. That has its own disadvantages, though, because it will lead to too many shareholders in one project. So ideally there should be few shareholders, but the reality is that it makes more sense at the moment to go for a share issue," Van der Waal said.
Peters said SA was in talks with countries in the region. "We are talking to people in Namcor (Namibia) and people in Sonangol (Angola)," she said, adding that no commitments would be made before completion of the plant's feasibility study.
PetroSA has on numerous occasions said it was looking for a private sector partner in the project.
"In this sense, (the) private sector is definitely invited to participate in the project. The strategy is that PetroSA, as a national oil company, will develop the project and co-invest to anchor the project in SA and give other investors confidence in the mega project," PetroSA vice-president for new ventures (midstream) Joern Falbe said earlier this year.
The project is due to come on stream in 2014.
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