(Ecofin Agency) - • Natref refinery, operated by Sasol and Prax Group, risks closure following a January fire and mounting costs
• Sipho Mkhize warns of economic viability concerns tied to logistics, infrastructure, and debt
• Sasol and Transnet reached a $240 million settlement that may help sustain refinery operations

The Natref refinery in Sasolburg, South Africa, jointly operated by Sasol and Prax Group, is facing a serious threat of closure following a damaging fire in January 2025. The refinery, which has a production capacity of 108,500 barrels per day, is grappling with growing financial pressure and logistical inefficiencies that now cast doubt on its long-term viability.

The warning came from Sipho Mkhize, president of the South African National Petroleum Company (SANPC), during the company’s activity launch on May 23. Mkhize emphasized that the plant is no longer able to sustain South Africa’s oil supply and may be forced to shut down unless significant interventions are made.

One of the main financial stressors cited was the mounting debt burden of Sasol. As of December 31, 2024, Sasol reported a net debt of 116.9 billion rands (about $6.2 billion), though it remains unclear how much of that is linked specifically to Natref. In addition to debt, the refinery suffers from high logistical costs, largely due to reliance on an underutilized offshore unloading buoy.

Another key issue is the lack of investment in modern infrastructure. Mkhize warned that without upgrades to Natref’s logistics and processing systems, the facility may soon become unsustainable. “If these financial pressures continue unabated, NATREF may have to cease operations,” he stated, adding that closure would pose a serious risk to energy supply security in South Africa’s already stressed energy market.

To address these concerns, Mkhize recommended modernizing the current unloading system to allow for greater flexibility. He also proposed forming partnerships with Transnet, the state-owned enterprise responsible for managing ports, pipelines, and railway networks, to streamline logistics and reduce operational costs.

In a positive development, Sasol’s oil division announced that it would receive 4.3 billion rands ($240.3 million) from Transnet under an agreement signed on May 18. The deal is intended to resolve long-standing disputes, including issues related to the transport of fuel from the Port of Durban to Natref. The financial settlement may pave the way for renewed cooperation between Sasol and Transnet, potentially safeguarding the future of the refinery.