http://www.megweb.uct.ac.za/Iresearch/Intro/oil_industry.htm
Industry Research Project
The Oil and Petrol Industry
Introduction
South Africa is the leading economic power in Africa as well as a key player in the African oil industry. Liquid fuels are an important component of the South African energy sector.
The history of South Africa's oil industry goes back to 1884 when the first oil company was established in Cape Town to import refined products. Since then the industry has grown and matured. Today the country processes approximately 20 million tonnes per annum of crude and consumes 23 million tonnes of liquid fuel products of which 45 % is gasoline and 26% diesel. In 1999 imports of Petroleum Oils cost a total of R12,764,946000.
Oil Extraction
Until the 1990s, the upstream oil industry did not exist. There are currently small producing oilfields off the South East coast of South Africa. A nearby gasfield provides the raw materials for a synfuels plant at Mossel Bay. The development of the Mossgas project was subsidised by the Fuel Equalisation Fund at a cost of R523 154 000 up to 31 March 1997. A gasfield has been discovered off the West coast of South Africa and exploration continues in a number of offshore areas. There are plans to pipe gas from Mozambique and Namibia to South Africa’s industrial heartland. Because so much oil is imported the local price of petrol is crucially affected by international crude oil prices which in term depend on production decisions by the major oil producing nations which run OPEC as a cartel. OPEC quite rightly disclaim responsibility for high petrol prices.
Importance of coal
Because of South Africa's abundant supplies of cheap coal, liquid fuels only provide 21% of the energy requirements of the country. For the same reason South African refineries have extensive upgrading capability in order to maximise the production of gasoline and diesel at the expense of fuel oil which is primarily used for bunkering. Oil from coal synfuels plants owned by Sasol provide a significant proportion of South Africa’s liquid fuels. The major liquid fuel markets are in the Gauteng area of South Africa, so companies with easy access to this region from their manufacturing plants are at a strategic advantage.
Transformation
The South African oil industry is in the throes of transformation from the industry that served the apartheid era of secrecy and boycotts to a model more in line with the democratic and economic needs of the new South Africa. An empowerment consortium called Worldwide Africa Investment Holdings recently bought a 20% share in Engen. This is the first time that a black-controlled company has gained a significant interest in an SA oil major.
The Petrol Price
This is determined by several factors including the world cost of crude oil, taxation by central government and subsidisation of Sasol's operations. The Central Energy Fund administers the Fuel Equalisation fund which starts to run at a loss when crude oil prices increase and the exchange rate of the Rand depreciates. Eventually this triggers a decision to increase the petrol price. Nevertheless there is an argument to suggest that the South African fuel price is still cheap by international standards. Any change in the world market oil price is watched very closely by the Governor of the Reserve Bank because of the implications for monetary policy. The petrol price increased again from midnight on 1 August.
Key Organisations
The major petrol refining and distributing firms operating in South Africa are: BP Southern Africa (Pty) Ltd; Caltex Oil (SA) (Pty) Ltd; Engen Petroleum Ltd; Shell South Africa (Pty) Ltd; Total South Africa (Pty) Ltd and Zenex Oil (Pty) Ltd. The South African Petroleum Industry Association (SAPIA) was formed in July 1994 by these 6 companies to represent the common interests of the petroleum refining and marketing industry in South Africa; and to promote understanding of the industry's contribution to economic and social progress with all stakeholders.
The Retail Motor Industry organisation and NABFRA are groups representing service station owners. The CWIU, SACWU and NUMSA are unions active in the oil industry and have achieved a central bargaining unit for the oil and chemicals industry.
Sources:
Mbendi Oil Industry Profile
!!!New!!!
Article on Labour in the Petrol Industry
High Octane, Low Wages (Mail and Guardian 21/07/2000)
Articles on the Oil Price
Oil Tumbles as USA Taps Strategic Reserves
Opec's Last Chance to extract high Prices (Business Report 10/09/2000)
Oil Prices at 10 Year High (Business Day 21/09/2000)
http://www.eia.doe.gov/emeu/cabs/safrica.html
excerpt:
December 2000
South Africa The Republic of South Africa, a major coal producer and exporter, has a highly developed synthetic fuel industry and small reserves of oil. South Africa's prospects for sustained natural gas production received a major boost in March 2000 after the discovery of significant offshore reserves.
Note: Information contained in this report is the best available as of December 2000 and can change. GENERAL BACKGROUND In June 1999, President Thabo Mbeki was elected to succeed Nelson Mandela in South Africa's second democratic, non-racial, national election. South Africa, with its capital in Pretoria, is a prominent member of the Organization of African Unity (OAU), the Southern Africa Development Community (SADC), and the Southern Africa Customs Union (SACU).
South Africa's economic growth has been somewhat sluggish in recent years; real gross domestic product (GDP) grew at 1.2% in 1999 and is predicted to grow by 2.5% in 2000. Other economic indicators have been strong, however, prompting the World Bank and other international financial institutions to praise South Africa's economy. In 2000, Standard and Poor's joined Moody's Investor Service in granting South Africa investor-grade status. Foreign direct investment, however, remains below expectations. Although strong against the euro and pound sterling, South Africa's currency, the rand, has lost 20% of its value against the dollar since January 2000. The falling currency, when combined with higher prices for imported oil, has prompted fears of inflation in the country. Currently, inflation is predicted to average 6% for several years.
The cornerstone of South Africa's relationship with the United States is the Binational Commission, which promotes ties across a broad spectrum of trade, business, human resource, energy, environmental, and scientific and technological issues. The Commission's Sustainable Energy Committee coordinates efforts relating to the legal and financial infrastructure needed to increase the availability of electricity; construction of energy-efficient homes; use of clean, renewable fuels in homes and transportation; and training and job opportunities in the energy sector. The U.S. Department of Energy and South Africa's Department of Mineral and Energy Affairs are cooperating in an energy data and information exchange.
COAL Coal is the primary fuel produced and consumed in South Africa and is one of the country's largest sources of foreign exchange. The country's coal reserves are mainly bituminous, with relatively high ash content (about 45%) and low sulfur content (about 1%). Three fields (Waterberg, Witbank, and Highveld) hold 70% of total recoverable reserves. Several areas, including parts of the Waterberg field, have been identified as having potential for future coalbed methane development.
According to data from the South Africa's Department of Mineral and Energy Affairs, coal production in 1999 was 246.4 million short tons (mmst), a decrease of 0.4 mmst from 1998 due to a slump in the international coal market. Billiton's coal arm, Ingwe Coal (Ingwe), and Anglo American's (Amcoal) coal division, Anglo Coal, are the two largest coal producers in South Africa. In June 2000, Anglo Coal and the synthetic fuels group, Sasol, announced a study of the feasibility of joint development of Anglo Coal's Kriel South coal reserves. The study is part of Sasol's ongoing evaluation of the costs and benefits of its coal mining operations.
As the South African mining industry is still predominantly white-controlled, emphasis has been placed on stimulating black-owned companies in the coal industry, as well as throughout the energy sector as a whole. In compliance with South African law and the objectives stated in the government's Energy Policy White Paper, large corporations have made room -- often through the sale of existing assets -- in the South African energy sector for emerging black-owned firms. These black-owned firms are commonly referred to as "empowerment" groups by industry, the government and the South African media. For example, South Africa's procurement policies for Eskom, the parastatal electric utility, grant preferences to companies owned by previously disadvantaged communities in South Africa. In November 2000, Anglo Coal and Ingwe sold assets for $222 million to the black empowerment group Eyesizwe Coal, creating South Africa's fourth largest coal mining company, NewCoal. Anglo Coal retained 11% of NewCoal, and Ingwe retained a 9% interest. NewCoal anticipates production of 19.8 mmst per year, of which 15.4 mmst per year is under contract to Eskom.
Exports Coal exports (nearly one-third of total production) are shipped almost exclusively through the Richards Bay Coal Terminal (RBCT), the world's largest coal export facility. Europe is the primary export market destination, followed by the Pacific Rim countries. Only shareholding members of the company use the RBCT. Current shareholders are: Ingwe, Amcoal, Angovaal, JCI/Lonrho/Duiker, Total SA, Sasol, Gold Fields, Kangra and NewCoal. Coal exports from Richards Bay are expected to reach approximately 73.3 mmst in 2000, up from nearly 69 mmst in 1999.
Other port facilities utilized for coal exports are the recently-opened South Dunes Coal Terminal (SDCT), Durban and Maputo in Mozambique. ISCOR currently exports its coking coal through Durban, and Gold Fields is using Maputo as an export site. Exports through Maputo could increase in the future as infrastructure is upgraded and added. The rail-link between South Africa and Maputo is undergoing a $13.8-million upgrade, and there are plans to dredge the harbor to accommodate larger vessels.
Consumption Estimated domestic consumption of coal was 177.1 mmst in 1998. Electric power generation and synthetic fuel industries consume approximately 85% of local production. Other major steam coal consuming sectors include: gold mining, the cement industry, and the brick and tile industry.
ISCOR's steel plants are the main consumers of domestic coking coal in South Africa. Three-fourths of the requirements (about 3.9 mmst annually) are met by ISCOR's mining operations (the fourth largest) in South Africa. ISCOR also utilizes imports of coking coal and supplies from other local producers to satisfy the remainder of its requirements. Sasol's synthetic fuel and petrochemical operations are another significant source of domestic coal consumption. In 1995, the facilities consumed nearly 40 mmst of coal, of which Sasol's mines met 95% of the requirements.
SYNTHETIC FUELS South Africa has a highly developed synthetic fuels industry, which takes advantage of the country's abundant coal resources and offshore natural gas and condensate production in Mossel Bay. The two major players are Sasol (coal-to-oil/chemicals) and Mossgas (natural gas-to-petroleum products). Sasol has the capacity to produce 150,000 barrels per day (bbl/d), and Mossgas 45,000 bbl/d. The South African government (SAG) ended Sasol's annual $150 million subsidy in July 1999, which was designed to protect it against cheaper imported crude oil.
Sasol is the world's largest manufacturer of oil from coal, with coal liquefaction plants located at Secunda (oil) and Sasolburg (petrochemicals). Started by the government in the 1950s to help reduce South Africa's dependence on imported oil, the company was privatized in 1979. Coal is first gasified, then turned into a range of liquid fuels and petrochemical feedstocks. Sasol is upgrading and expanding its Secunda facilities to reduce costs and to help it remain competitive. The upgrades and expansion are tentatively expected to be completed by 2001.
In early 2000, Sasol launched a study of the feasibility of replacing coal with natural gas as the feedstock for its conversion process and has since taken steps to implement the change. Sasol estimates that the switch to natural gas, which will entail the construction of a 558-mile pipeline to transport gas from the Pande and Temane fields in Mozambique to Sasolburg and Secunda, could be completed within three years. In October 2000, Sasol and the Mozambican government signed three accords which allow for construction of the pipeline and transport of the natural gas out of Mozambique. Sasol was also granted the rights to explore for additional hydrocarbons in the area around the Pande and Temane fields. A regulatory framework for the project was agreed upon in December 2000. Construction on the $500-million pipeline is expected to begin in June 2001. Sasol cites high impending capital investment expenditures in its coal mining operations along with the high costs of compliance with environmental regulations associated with coal as the reasons behind the change to natural gas.
In October 2000, Sasol announced the formation of a joint venture with Chevron to commercialize natural gas-to-liquids technology worldwide. The two companies are equal partners in the venture and anticipate investments totaling more than $5 billion over the next five to ten years.
Mossgas began production in 1993 and remains state-owned. The company is part of the Central Energy Fund (CEF) group of companies through which the State's interest in the liquid fuel industry is owned, developed and managed commercially. Each of these companies has its own Board, which is appointed by the Minister of Minerals and Energy. The Mossgas plant receives natural gas and condensate from the F-A gas field in Mossel Bay through a 54-mile pipeline. Gas from the adjacent E-M field began reaching the onshore plant in September 2000. Mossgas converts the gas into a variety of liquid fuels including motor gasoline, distillates, kerosene, and LPG. Mossgas is constructing a new plant designed to produce 70,000 tons of low aromatic distillates a year, destined for export. Construction is scheduled for completion in the third quarter of 2002.
---it looks like they could do marvelously if they weren't saddled with the "empowerment' communist ANC schemes of transferring businesses to people who are clueless of what they are all about.