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8h ago
By Shirley le Guern
Durban – The Engen (Enref) oil refinery is expected to close its doors in 2023 and the facility could become a fuel storage facility for imported products, according to sources close to the refinery.
The refinery’s suppliers, who did not want to be named, said they were informed last week that they should plan ahead for its likely closure, although Engen’s head office says no formal decision has been made.
Combined with depressed demand as a result of Covid-19 and persistent low gross refining margins, the outlook for the refining business remains negative and continues to deteriorate, Engen spokesman Gavin Smith said in a statement.
“Despite an excellent record of operating efficiency, our refinery continues to be adversely affected by the external global refining environment,” said Smith.
He added that Engen had initiated consultations with employees regarding a billions of rand proposal to increase its import and supply capacity in Durban.
“The proposal, which will ensure that Engen meets South Africa’s growing demand for petroleum products, remains in a consultation stage with employees during which alternatives are being evaluated,” he said.
Engen confirmed that it is considering various options regarding the refinery, but no decision has been made.
The refinery employs 650 people and it is unclear how many jobs would be in jeopardy if it closed.
Smith added that Engen would consult with stakeholders at the appropriate time if a decision is made.
Yesterday, Nomusa Dube-Ncube, KwaZulu-Natal MEC for Economic Development, Tourism and Environmental Affairs, said that it had assigned KZN Trade and Investment Executive Director Neville Matjie to engage with Engen to investigate this matter.
“This is part of the implementation of the reconstruction and economic transformation plan that aims to reverse the situation,” he said.
Commissioned in 1954, the refinery is 66 years old. However, it has undergone constant modernization and routine regulatory inspections and maintenance work on its process equipment.
It currently produces fuel to Euro 2 specifications, according to Smith.
It is the third largest oil refinery in South Africa with a capacity of 135,000 barrels per day.
Since South Africa does not have its own oil deposits, liquid fuels are imported in finished form or as crude oil that is refined in the country’s oil refineries.
Although no official figures are available, the World Bank estimates that around 18.63% of South Africa’s liquid fuel was imported in 2018. As demand has continued to outpace supply from local refineries, it has continued to increase.
According to the South African Petroleum Industry Association, the fuel sector contributes approximately 8.5% of the country’s gross domestic product.
He said investment in former South African refineries was necessary to avoid a widening trade deficit for liquid fuels.
Smith said that about 60% of Engen products sold in South Africa were produced by Enref and the rest imported or purchased from other local oil companies.
“The global refining environment is evolving with the emergence of large, integrated and complex refineries, resulting in a global excess supply of fuel and low refining margins. This is expected to persist in the future. “
Transnet, which operates the R30 billion multi-product pipeline carrying four different petroleum products, including refined gasoline and diesel, between Durban and Gauteng, said it had not been informed of the proposed changes at Enref.
He added that he could not comment on the impact of the closure of the refinery in the port of Durban or on the operation of the single buoy moored about 2.5 km off the coast of Durban, through which both crude oil is discharged like refined products.
Engen, together with other companies in the fuel sector, is co-owner of this monobuoy mooring.
Dube-Ncube said that as part of the province’s implementation of the economic transformation and reconstruction plan, they had adopted a business outreach, retention and support program that focused on:
Support companies that are weak but have strong foundations and can become viable by accessing existing short-term industrial policy support programs to contain further job losses and protect important production capacities.
Support the need for expansion of existing businesses by creating an environment conducive to new investment.
He added that he was also focusing on the key interventions that are contemplated in the KZN Growth and Development Plan, which are to ensure that they improve access to financing for economic development and monitoring the performance of the value chain in key sectors. .
“Engen continues to be a key player and leader in the South African oil market. We are proud that this company is located in this province and in the South Durban Basin, where it contributes to job creation.
“Our wish is for the company to remain in this province for many more years,” he added.
“Importantly, as KZN, we potentially have access to the ocean’s abundant resources, including offshore fishing, oil and gas, and marine tourism.
“Our ports of Durban and Richards Bay handle more than 60% of the country’s ocean cargo. We remain determined to work with companies like Engen to increase the participation of previously disadvantaged communities in sectors such as oil and gas, the maritime industry, ”added Dube-Ncube.
She said the department was also determined to position the Richards Bay Industrial Development Zone as a site for energy infrastructure.
“The importance of the energy supply sector lies both in improving the quality of life of the previously disadvantaged majority and in supporting large-scale industrial development.
“In particular, the oil and gas industry presents many partnership opportunities in this province. Before the shutdown, statistics showed that the oil and gas industry employed approximately 7500 people and had an estimated annual turnover of more than R196 billion, with the refining segment of the industry contributing almost 99% to the total industry turnover, ”said Dube-Ncube.
The industry is believed to account for more than 90,000 indirect jobs in the distribution and marketing segment of the industry’s value chain, he added.
The Mercury
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