South Africa and China Partner on $11-Billion Refinery Project

PetroSA
PetroSA refinery in Mossel Bay, South Africa

South Africa’s state oil company PetroSA has partnered with China’s Sinopec Group to work together in pushing the building of the proposed Mthombo crude oil refinery project, PetroSA said on Monday.

Construction on project Mthombo project, which will be the biggest refinery in Africa, is expected to start this year, with the refinery to come on stream by 2015.

The US$11-billion refinery in the industrial port of Coega near Port Elizabeth will have a 400,000 barrels a day capacity and will ensure security of fuel supply in South Africa.

Market studies, business case

The agreement, according to PetroSA, will involve the commissioning of studies over two phases.

The first phase will focus on market studies, the review and selection of a business case, while the second will develop a business case that is expected to prepare Project Mthombo for the important Front End Engineering Design (FEED) stage.

FEED refers to the basic engineering which is conducted after the completion of a conceptual design or feasibility study of a project. At this stage, before the start of engineering, procurement and construction, various studies take place to figure out technical issues and estimate rough investment cost.

The agreement has made it possible for PetroSA and Sinopec to contract Sinopec Engineering Incorporation (SEI) to conduct the studies on behalf of the two companies. The two phases are expected to last 18 months.

In preparation for the studies, PetroSA says they have also established a steering committee to guide and manage the process. A working group will also be set up to work closely with SEI.

PetroSA Group CEO Nosizwe Nokwe said the JSA (Joint Study Agreement) with Sinopec would significantly advance the realisation of Project Mthombo.

“This JSA will align the partners and develop an integrated owner’s team, in line with best practices for the planning and executing of this mega project. Project Mthombo will significantly gain from the experience and expertise of Sinopec,” Nokwe said.

Liquid Fuels Plan

She added that as PetroSA, they are convinced that the results of this important study will be key in the development of the 20-year Liquid Fuels Plan and the work of the Presidential Infrastructure Coordinating Commission.

Sinopec was ranked 5th in the Fortune Global 500 index for 2011. It specialises in industrial investment, the marketing and comprehensive utilisation of oil and natural gas, oil refining and transportation of petrochemicals.

In September 2011, PetroSA signed a Memorandum of Understanding (MoU) with the Sinopec Group aimed at creating the conditions for cooperation in the areas of developing a crude oil refinery, exploration, development and production of hydrocarbon opportunities and downstream activities.