The state’s acquisition of the Sapref refinery in Durban could revive local base oils production in South Africa’s import-dependent lubricant market. The Mineral and Petroleum Resources Ministry is seeking private investors to get the plant back on its feet and enhance local capacity.
Co-owners Shell and BP mothballed Sapref in March 2022 after deciding it was no longer profitable to keep up with stricter fuel specifications. Amid much excitement from the government, the state-owned Central Energy Fund (CEF) acquired the refinery in May this year for a nominal 1 rand (U.S. $0.05). Shell and BP said they will also chip in $15 million to help operational costs.
Critics of the acquisition who work in the local lubricant market do not share the excitement. Patrick Swan, an industry consultant, said restarting Sapref will have no meaningful impact on local production.
“I don’t think that anything will come out of Sapref’s purchase by the CEF,” Swan told Lube Report. “I don’t think there is a need for the CEF to buy it.”
South Africa’s base oil refining capacity “will stay as it is … the biggest turnover of the refinery is fuel, but fuel is cheaper in the global market than the local market,” Swan said.
Another industry figure who asked to remain anonymous also said reopening Sapref will not enhance local base oils production.
“Group I base oils refineries are closing all over the world, and Sapref has been out of use for more than two years and is too old to produce base oils for local consumption,” he said. “We are going to remain a net importer of base oils, and the government will end up dismantling Sapref and using it as a storage for imported base oils and fuels.”
Near price parity between Group I and Group II base oils would also restrict Sapref’s profitability, Swan thinks.
“There is less of Group I, and it is a global phenomenon,” said Swan. “Group II is on price parity with Group I, so people are changing to Group II. We are mainly in Group II except for the bright stock that is still left in Group I.”
President of the South African Institute of Tribology Henco Booysen told Lube Report that reviving Sapref will be good for the local lubricant market because “there are no local base oil supplies in South Africa” and that “Every single of base oil utilized in this country is imported.”
Sapref was commissioned in 1963 and at its peak accounted for 35% of South Africa’s refining capacity. Sapref could process 180,00 barrels per day of crude into fuel and 172,000 metric tons per year of Group I base oil.