‘Opportunity for new entrants in refinery sector’

‘Opportunity for new entrants in refinery sector’

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THE RECENT changes in the South African refineries industry is creating a fertile ground for up-and-coming local challengers with a focus on sustainable transformation in the sector, according to Suzako, a Cape-Town based independent fuel solutions provider.

Eden Gagiano, the head of trading at Suzako, which provides oil, gas and energy products and services, said yesterday that the recent spate of closures of major refineries, and the uncertainty over whether it was worthwhile to get the local refining industry back on its feet, had fundamentally changed the country’s fuel landscape.

“It’s looking more than likely that, in the next few years, the country will shift to an almost total dependence on refined fuel imports,” said Gagiano.

In January, South African Petroleum Industry Association (Sapia) executive director Avhapfani Tshifularo said in an interview with S&P Global that South Africa would grow even more dependent on imports for its fuel needs, as the country’s refining sector faced an uncertain future.

Sapia attributed this to the shortage of funds from the government and a lack of sufficient demand in South Africa to warrant significant investment. It said there had been talk among some shareholders of withdrawing from existing projects.

In March, Tshifularo said 55 percent of local demand was being met by imported product, because more than two-fifths of the country’s refinery capacity was off-line, and refineries were losing money.

Astron Energy refinery in Cape Town is currently offline after a fire last year. The Engen refinery in Durban, which was owned by Petronas, has also been shut down.

Yesterday, Bloomberg reported that Petroliam Nasional was reviving discussions on a potential exit from South African fuel retailer business Engen, citing people familiar with the matter.

Gagiano said the sector was traditionally dominated by large multinational traders, and it was now proving to be a fertile ground for up-and-coming challengers with a focus on local and sustainable transformation.

“The current turbulence in the South African industry is resulting in opportunities and open up the playing field for new and agile companies with significant expertise, and that also bring black economic empowerment integrity and entrepreneurial mindsets,” he said.

Gagiano said: “This is the era for disruptions for good reasons. We are looking towards a more sustainable world, and every industry needs the challengers who are bringing new perspectives and new ideas of doing business in better ways.”

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