Project Mthombo

Project Mthombo

The Eastern Cape is set to house South Africa’s second oil refinery at Coega. Led by PetroSA, the national oil company, the project is being developed with Sinopec as the anchor partner and Industrial Development Corporation (IDC) as the national funding partner. Sinopec is a Chinese national oil company that has extensive experience in building and managing refinery projects, specialises in industrial investment, the marketing and comprehensive utilization of oil and natural gas, oil refining, and transportation of petrochemicals.
PetroSA, together with Sinopec, have just completed the review of the project business case and a refinery capacity of 300 000 bbl/d has been approved by both partners. A viable business case has been established for the project. 
Project Mthombo crude oil strategy considers long term trends to ensure that the refinery will remain competitive in markets may be fundamentally different from today's markets. The crude processing strategy is based on selecting design crudes that ensure the refinery supports a number of commercial and strategic objectives at reasonable capital and operating costs. Project Mthombo has therefore evaluated heavy crudes that are challenging to process which can be sourced from Venezuela, West Africa, Middle East crude and Brazil and Arab Heavy and Marlim crude oil blend has been chosen as the design crude.
Strategically located in the trade routes, Project Mthombo is set to be globally commercially competitive.  Coega has several advantages over other locations. The most important are: The central coastal location offers logistics flexibility for the supply of automotive fuel to the east and west coasts. In several aspects the Coega refinery will follow the successful Singapore model: a world-class manufacturing site in a central location with a deep-water port and connecting small fragmented markets.
The liquid fuels market in the Eastern & Western Cape regions is rapidly growing and the regions are already importing fuels. A refinery in Coega can supply the growing demand more easily than a refinery elsewhere using the existing pipeline network. The project can ship the products from the Port of Ngqura to Durban and from there via the existing pipeline to Gauteng. With the demand set to grow over the years, putting a strain on the existing pipeline infrastructure, a feasibility study is being conducted for building another complementary pipeline connecting Coega and Gauteng via Bloemfontein, adding flexibility and enhancing security of supply.

World-class infrastructure is already in place in Coega. The refinery will leverage governmental investment in the Coega IDZ and avoid double investment at other sites. Coega offers excellent opportunities for growing an adjacent petrochemical industry. Major markets for plastics are already in place nearby in the motor car manufacturing industry.
Project Mthombo is one of the Strategic Integrated Projects coordinated by the Presidential Infrastructure Coordinating Commission (PICC to transform the economic landscape of South Africa, create a significant numbers of new jobs and strengthen the delivery of basic services to the people of South Africa.
Not only is the project economically viable and able to attract investors because of its high returns and low  operational costs per barrel, but it environmentally friendly and flexible to meet current and future fuel specs. The flexibility also extends to its ability to process a wide range of feedstock and its diesel/petrol production. This refinery will utilise existing technology thus has low technical risk. Additionally, the refinery products will be supported by the growth in local fuels demand and it will generate additional revenue from sales of electricity. 

As part of the Strategic Integrated Projects identified by PICC under SIP-3 as critical infrastructure projects in the Eastern Cape, the Coega refinery will be a major engine for economic development in the province. Not only does the project have available market for its products, but it is technically feasible, commercially viable and strategically vital. The project’s multiplier effect on the economy and sustainable job creation will be significant. It is expected to create between 12 000 and 21 000 direct & indirect jobs during construction & between 2 000 & 5 000 when operational and it will contribute a huge saving on the country’s Balance of Payments (BoP). Impact analysis has shown that between the period 2021 to 2030 the savings on the balance of payments attributed to the refinery will be about R300m per annum in 2012 terms and for the period 2031 to 2035, the net  BoP savings is estimated to about R1.1 bn per annum.
In line with the country’s 2030 vision tabled in the NDP Project Mthombo will deliver massive benefits for the country. PetroSA is committed to and supports the implementation of environmental best practices. The new refinery will be designed to international best practice standards, bearing the Kyoto principles in mind, and to meet all international standards for project financing, including the Equator Principles.
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