Government’s Operation Phakisa, which is expected to unlock the economic potential of South Africa’s oceans and, thereby, advance offshore oil and gas exploration, “should be implemented without much delay”, notes the Coega Development Corporation (CDC), whose industrial development zone (IDZ), in the Eastern Cape, has recently received a major endorsement as an ideal location for oil refinery- and energy-related projects.
The endorsement was part of the African National Congress National General Council (NGC) resolution under the topic of Economic Transformation and the subheading Oil and Gas.
The NGC resolution states that setting up refining capacity in the Coega special economic zone (SEZ) is an important development for the liquid- fuels sector’s growth and development as it will boost industrialisation and job creation and attract significant foreign direct investment.
The CDC notes that the proposed crude oil refinery, or Project Mthombo, at the Coega IDZ is strategically located, as it will be at the heart of trade flows and meet a growing demand for petroleum products.
The proposed refinery has been specified to process 300 000 bbl/d of crude oil and is estimated to cost about $10-billion to construct.
The operating costs, including feedstock, of the refinery, which will produce diesel, petrol and jet fuel, have been estimated at about R94.6-billion a year.
The CDC points out that the feasibility studies on the project have been completed and construction is estimated to take between three and four years.
Operations are expected to start in 2022, though an earlier date for the implementation of the project will be ideal, CDC head of marketing and communications Dr Ayanda Vilakazi says.
Coega, highlights the CDC, is ideally placed to serve markets at home and abroad, as it provides an enabling environment, where infrastructure is already in place.
“The oil refinery will contribute to the secure supply of liquid fuels and it presents significant upstream and downstream opportunities to contribute substantially to economic growth in both urban and rural areas through the development of a petrochemicals cluster.”
The development offers opportunities in industrial diversification; agriculture, agroprocessing and rural development; sustainable job creation and supplier development.
The CDC stressed that the oil refinery will strongly benefit the Eastern Cape with 83% of the economic impact accruing to the province.
Household income in the province could rise R1.8-billion a year, with economic growth reaching 5.5% a year, states the CDC.
During the construction phase, up to 23 000 jobs could be created, with between 5 000 and 10 000 of these being allocated to highly-skilled artisans.
During operation, the CDC estimates that the project will create about 1 000 permanent refinery jobs and 11 000 indirect jobs, adding that a training facility is planned.
Spin-offs from the localisation initiative of about R20-billion could accrue to the province, the CDC points out.
Should it be realised, the Coega oil refinery will relieve congestion at South Africa’s Durban facilities and will become the second pipeline to Gauteng and reduce supply-line risk.
In addition, South Africa’s current fuel production capacity cannot meet demand. Refineries have been upgraded as far as is practical and, by 2018, South Africa may have to import 20% of its fuel to meet consumption demand, the CDC warns.
Project Mthombo is also strongly aligned to the Eastern Cape’s provincial industrial development strategy. The Coega IDZ plays a pivotal role as a provincial asset, together with the Ngqura port, which is the transshipment hub for sub-Saharan Africa, the CDC explains.
Coega is served by two ports, namely the Port of Port Elizabeth and the deep-water Port of Ngqura, in Zone 1 of the Coega IDZ.
As a SEZ, Coega boasts a special suite of incentives available to both current and future investors in the Coega IDZ, the CDC advises.
The SEZ policy was promulgated last year and triggered the suites of incentives designed to make the zones more attractive to both domestic and foreign investment.
The Coega IDZ uses a 14-cluster zone model and has land available to host key gas-to-power projects, with spin-offs for various other sectors.
Included among many of the SEZ incentives within the Coega IDZ is the 15% corporate tax and corporate income tax rate for qualifying investors, and, in the customs- controlled areas, value-added tax and customs duty suspension.