Transitioning SA's Petrochemical Value Chain

Liquid fuels are used widely in the economy, for transport and stationary sources of combustion in the power, industry and residential sectors. Stationary sources are not considered further in this study, lying outside the scope defined in the Method section. Liquid fuels used for transport include petrol, diesel, paraffin, jet fuel, fuel oil and liquified petroleum gas (LPG). Petrol and diesel dominate the liquid fuels market, although there has been a significant drop in petrol consumption and some decline in jet fuel consumption in recent years.

The country’s liquid fuels requirements are met through:

• local refining of imported crude oil, which is sourced mainly from the Middle East and other African countries; 

• synthetic fuel produced at Secunda via the coal-to-liquids process (CTL) and by PetroSA through the gas- to-liquids (GTL) process (when the latter is in operation); and 

• refined product imports. 

South Africa has four crude oil refineries (refer to map below), Sapref, Enref and Astron (previously Chevron) at the coast and Natref inland in Sasolburg. At the time of writing, however, only Natref was in operation. Enref was understood to be permanently closed after a fire and was being converted to a fuel storage facility, and Sapref was badly damaged in the floods in KwaZulu-Natal, with consideration being given to repair and possibly sale thereof. Astron was due to come back online after closure due to a fire at the refinery. It is noted that although the local refineries were closed to adverse events, the closure of smaller refineries and importing refined product from so-called “mega refineries” is a global trend, although uncertainty still exists as to the extent and timing of this trend. There is still a discussion on the building of a new national refinery, although this is increasingly muted.

South African liquid fuels refineries, including Secunda, do not meet the Clean Fuels 2/Euro 5 emissions standards. Meeting these standards requires significant investment by the existing refineries, which may or may not require state support (Business Engagement). One of the motivations for moving to clean fuels was to support the local ICE manufacturers, who need to produce clean fuel-compliant vehicles for export. However, this issue now appears to have been superseded given the international decarbonisation – and now market imperative – to move to New Energy Vehicles. The Clean Fuels requirement further undermines the case for maintaining local refining capacity.

Synthetic liquid fuels production at Secunda and PetroSA from coal and gas respectively is discussed under the Process section of this study. There are also synergies between synthetic fuels production and the Natref refinery, with synthetic fuel from Secunda being blended with conventional crude refined product to achieve certain product specifications such as octane enhancement, and an overall low-sulphur product for market. Synthetic jet fuel is also blended with 50% crude oil derived jet fuel, with the major supply of jet fuel to OR Tambo airport being from the Natref refinery and Sasol Secunda. Sasol’s multiproduct liquid fuel pipeline allows fuel slugs to be transferred between Secunda and Natref.

To meet the balance of liquid fuel demand, refined product is imported. Given that margins on refining have historically been low, importing refined product rather than local refining does not have a significant impact on fuel prices, although it does expose South Africa to risks of security of supply (Business Engagement).

Furthermore, South Africa remains vulnerable to price fluctuations, demand shortages and volatility on global oil markets. There are also issues relating to the availability of storage facilities as more product is imported.

Finally, there is a spatial aspect to liquid fuels supply. All refineries apart from Natref are situated at the coast, and this is also where imported product comes into the country. Infrastructure to receive supply as well as to transport it inland (the Transnet Multi-Product Pipeline) is mired in economic and operational issues. Secunda’s synthetic fuels have a locational advantage being manufactured inland, therefore not being subjected to the costs and uncertainties of having to be transported from the coast.

In terms of projections into the future, and based on studies modelling Paris-aligned net zero pathway for the South African economy considered in the Methods and Concepts section,  production of, and demand for, fossil-based liquid fuels is anticipated to decline substantially to 2050 (refer to chart below). Domestic production ramps down faster than domestic demand, with residual demand being met through liquid fuel imports. Demand for petrol is the first to decline due to the anticipated ramp up in EVs, with diesel only seeing substantive declines in the 2040s – due to its use in heavy transport and other hard-to-electrify applications. By 2050, the modelling shows more than a 90% reduction in demand for fossil-based liquid fuels, with no more domestic production remaining.