South African oil refineries are performing poorly compared to their southeast Asian and western European peers, according to the South African Petroleum Industry Association (Sapia).

Sapia said the operational availability of local refineries was 3% lower than their foreign peers, while utilisation was lower by up to 15%. Local refineries were also likely to experience unplanned downtime two to three times more often than their peers.

Independent energy consultant Nhlanhla Gumede, of Khanya-Africa Business Solutions, yesterday said: & I would like to know what they mean by peers. No one refinery is the same as the other. It would be interesting to see the benchmarks used. For instance, the age of the refinery is an important factor. There must be a definition of peer. Are we talking about refineries that use light or heavy crude?& Mr Gumede said a number of Organisation for Economic Co- operation and Development (OECD) refineries were operating at about 80% of capacity because of the economic downturn, & and that allows for more maintenance compared to a refinery operating at 95% to 97% of capacity& He said refinery profitability determined the level of investment in a refinery.

& The South African pricing system cannot, however, be accused of yielding poor refining margins. In fact, if an appropriate benchmark refinery can be found, South African refinery margins would be better.& The state of the refineries has come under the spotlight since Energy Minister Dipuo Peters decided last year to review SA's refineries. In a statement announcing the move, the Department of Energy said Ms Peters was concerned about the increasing frequency and severity of unplanned refinery shutdowns. The shutdowns at the various refineries affect the availability of a number of petroleum products such as petrol, diesel, liquefied petroleum gas (LPG) and bitumen.

& Sapia is committed to working with the Department of Energy to ensure that the South African oil refineries' performance is improved, and thereby improve the security of supply of petroleum products,& Sapia executive director Avhapfani Tshifularo said.

In her budget vote speech earlier this month, Ms Peters said the audit of the refineries was meant to assess their state. & A preliminary investigation indicates that our refineries are experiencing reduced production levels, which is equally a threat to liquid fuels security of supply.& Mr Tshifularo said investment in the refinery sector tended to be largely driven by the refiners' need to comply with government fuel specifications, environmental emissions laws and drives to improve energy efficiency. & Because SA is lagging in terms of clean fuels, emissions laws and energy efficiency, the investment in the refining sector is not where it should be,& he said.

& The upgrading of refineries in response to the Department of Energy Clean Fuels 2 and Department of Environmental Affairs' minimum emissions standards will go a long way in injecting massive investment in SA's refining sector in the next five to six years.& njobenis@bdfm.co.za

There must be a definition of peer. Are we talking about refineries that use light or heavy crude?

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(Originally published May 29, 2012, in Business Day.)