• South Africa’s CEF takes over dormant Sapref refinery for 1 rand, with no restart plan or cost assessment.
• State may face $1B revival and cleanup costs, as Shell and BP have no future obligations.
• Move aims to cut fuel imports, but lacks financial clarity and viability details.

The future of South Africa's Sapref refinery, which has a capacity of 180,000 barrels per day, is sparking increasing concern. The state-owned Central Energy Fund (CEF) has acquired the facility, which has been inactive for three years, without releasing a revival plan or a financial impact assessment. This situation risks increasing the state's fiscal burden, with restart costs estimated at $1 billion and unknown decommissioning liabilities.

According to local media reports on Monday, July 7, the refinery, previously co-owned by oil majors Shell and BP, was transferred to the CEF for a symbolic price of one rand. The two companies also agreed to pay approximately 286 million rand (about $15.4 million) to cover operating costs for the first year.

However, Shell and BP have no contractual obligation to contribute to future expenses, particularly for site cleanup or closure. Without a restart, CEF alone would be responsible for funding the decommissioning. This is a regulatory requirement that includes dismantling infrastructure, managing toxic waste, and restoring the site.

No official estimate has been released, but several sources close to the matter suggest potential liabilities could be in the hundreds of millions of rand. These risks are not reflected in CEF’s recent financial statements or any publicly disclosed strategic plan.

The lack of a clear viability projection for the project has drawn criticism. No timeline has been announced for a possible restart, nor has a supply strategy or expected return on investment been detailed. The National Treasury has yet to clarify whether the deal will involve recapitalization or a dedicated budgetary allocation.

A few months ago, the government justified the acquisition by citing a need to reduce dependence on fuel imports and contain the rising cost of fuel subsidies, which reached $7.5 billion in 2023.

While the CEF has mentioned scaling up Sapref’s output to 600,000 barrels per day, no technical or financial details have been released to assess the feasibility of such an expansion.

Abdel-Latif Boureima