The Petroleum Industry in South Africa 2024

Challenges

Fuel prices remain unaffordable causing a decline in consumption. The development of the gas industry remains beset by outdated gas policy, high gas prices, and insecurity of supply. The lack of refinery capacity leaves the country highly exposed to imports. The onerous costs of upgrading refineries to meet new environmental standards which are to be implemented from 2027.

Introduction

South Africa’s oil and gas refinery capacity has halved in the past four years, forcing the country into dependence on refined product imports when crude oil and natural gas prices are high. Refinery closures saw manufacturing revenue decline to 2017 levels. Fuel retail revenue has been boosted by higher petroleum prices, but local consumption of petroleum products has been declining. There is substantial change in the industry as a series of companies have divested and the government implements plans to revive idle capacity.

Opportunities

Government is looking to develop LNG supply for industrial heating, electricity generation, and liquid fuels production. Regulatory changes are facilitating private sector investment in oil and gas exploration and production. Shell’s downstream divestment possibly creates opportunity for new petroleum wholesalers and retailers to enter the market.

Outlook

The loss of localised oil and gas refinery capacity in recent years has threatened South Africa’s energy security and left the country vulnerable to price dynamics, making vital transport and heating products unaffordable. Efforts to confront the challenge have been hampered by the need for regulatory change and coherent energy policies. Regulatory developments include a new draft of the Integrated Energy Plan, a draft Gas Master Plan, and progress in the formulation of a new state petroleum company. Global shocks are influencing international price and trade dynamics less than previously. There is progress in natural gas and green hydrogen production projects. Significant investments have been initiated for the storage and trade of liquefied natural gas and liquefied petroleum gas.

Report Coverage

This report on the petroleum industry in South Africa includes comprehensive information on supply, refining, crude oil storage reserves, and the distribution and retail of petroleum products, including lubricants, LPG, LNG and biofuels. There is information on the size of the industry in terms of production and consumption, pipeline transportation, wholesale and retail, and the state of the industry, including the effect of refinery closures, pricing and policy, new projects, divestment and government’s plans to revive the industry. There are profiles of 65 companies including major multinationals such as Engen, BP and TotalEnergies, major local player Sasol, state-owned companies such as PetroSA, refineries including Natref, blenders such as Blendcor and gas companies such as LPG distributor Easigas and Egoli Gas Trends A raft of legislative changes are being introduced to accelerate transformation and facilitate oil and gas exploration and production, and strengthen the role of the state in the country’s energy security. A significant number of hydrogen, nitrogen and ammonia products have been initiated. A substantial projects pipeline has developed, especially for the development, commercialisation and international trade of natural gas. Divestment by a number of international companies. Fuel prices have risen rapidly since 2021, exacerbated by the exchange rate. Government hopes to restore local refinery capacity by restarting the gas-to-liquids refinery in Mossel Bay and the Sapref refinery in Durban. PetroSA posted net profits in 2023 for the first time since 2015. South Africa has lost half its refinery capacity in the past four years.