(Ecofin Agency) - In South Africa, the Deputy Director-General of Petroleum and Petroleum product regulation, Tesliso Maqubela, has announced that the Department of Energy plans to initiate talks with the petroleum industry concerning the deregulation of liquid fuels.

According to him, this will allow the market to set prices which would attract investment in upgrading South Africa’s refinery capacity in order to ease the challenges around cleaner fuels.

This is in response to a statement from South African Petroleum Industry Association (Sapia)’s chairperson, Maurice Radebe, that without government incentives and cost recovery allowances for investment in making cleaner fuels, South Africa’s petroleum refining industry would end up like its textiles and steel industry.

Radebe said the importation of 50 parts per million (PPM) diesel and higher-octane petrol were growing as local refineries could not produce up to the required capacity.

He added that the introduction of cleaner fuels 2, which implies new lower-sulphur liquid fuels, would require an upgrade to the country’s refineries. South Africa’s six refineries had a total of 703,000 barrels a day capacity.

The cleaner fuels 2 programme was launched in 2009 to be executed in 2017, but presently nothing was moving forward.

Maqubela said the department is currently working on an integrated energy plan, which will soon be presented to the Parliament and would also present an outline for both imports and the local refining of liquid fuels.

The Director-General disclosed that a decision has to be arrived at as to the construction of a new refinery in the country.

“We cannot have a resilient petroleum sector unless it is underpinned by a robust refining sector because SA is far from other production centres,” Maqubela told Business Day adding that it is not ideal to be wholly self-sufficient or entirely reliant on imports, but to have the facilities in place for both.

Anita Fatunji