Astron Energy, a subsidiary of global commodity trader Glencore (LON:GLEN), has committed up to six billion rand ($328 million) to upgrade its South African crude oil refinery in order to comply with the country’s upcoming cleaner fuel regulations. The investment aims to bring the facility in line with South Africa’s Clean Fuels II standards, which mandate lower sulphur content in both petrol and diesel.

The 100,000-barrels-per-day (bpd) refinery, located near Cape Town, is one of only two operational crude oil refineries in the country. With domestic refining capacity having halved in recent years, the move is seen as a significant step toward reducing South Africa’s heavy reliance on fuel imports.

Investment in Cleaner Fuel Technology

Astron Energy officials confirmed that construction work is already underway, with foundations laid for a Gasoline Hydrotreating Process that will reduce petrol’s sulphur levels to Euro 5 specifications. This will bring the fuel’s sulphur content down to 10 parts per million (ppm), in line with Clean Fuels II regulations.

These regulations were initially set to come into effect in 2017 but were delayed due to concerns over the cost of upgrading existing refining infrastructure. The new deadline is July 1, 2027, and Astron Energy’s chief executive officer, Thabiet Booley, assured lawmakers during a site visit on Wednesday that the company would meet the deadline.

South Africa’s Refining Challenges and Import Dependence

South Africa’s refining sector has faced significant challenges over the past decade. The country, which once had several operational crude oil refineries, has seen its domestic refining capacity shrink to around 358,000 bpd. This is largely due to the closure and mothballing of the two largest crude refineries in Durban.

With fewer refineries in operation, Africa’s most industrialized economy now relies on imports for approximately 75% of its liquid fuel needs. The Fuel Industry Association of South Africa (FIASA) estimated that in 2023 alone, South Africa imported just over 19 billion litres of fuel to meet domestic demand.

The heavy dependence on imports has raised energy security concerns, particularly in light of South Africa’s limited fuel reserves. According to the Strategic Fuel Fund, the government agency responsible for securing crude oil supplies, the country currently has less than 21 days’ worth of fuel reserves in the event of a major supply disruption.

Government Efforts to Strengthen Refining Capacity

In an effort to bolster local fuel production and reduce the risk of supply shortages, the South African government has purchased the Sapref refinery in Durban.

The 180,000-bpd facility, previously the country’s largest crude oil refinery, was mothballed in 2022 before suffering extensive damage during severe flooding. The government’s acquisition of the refinery is part of a broader strategy to revive the domestic refining sector and enhance South Africa’s fuel security.

Astron Energy’s investment in cleaner fuel technology is expected to play a critical role in ensuring South Africa meets its cleaner fuel obligations while also contributing to a more stable and resilient fuel supply system.

As the 2027 deadline approaches, industry analysts will be watching closely to see whether other refiners follow suit or if South Africa remains heavily reliant on imports. With ongoing concerns about fuel security and infrastructure readiness, the success of Astron Energy’s upgrade may set a precedent for the future of fuel refining in South Africa.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

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