The oil industry is divided into upstream and downstream activities. Upstream refers to the exploration and production of gas and crude oil. Downstream refers to the refining, transportation and marketing of end-user products. South Africa has no crude oil reserves of its own and all of its crude oil requirements are met by imports principally from the Middle East and Africa (Source: South Africa Yearbook 2012/2013).
The major petroleum products that are sold in South Africa are petrol, diesel, jet fuel, illuminating paraffin, fuel oil, bitumen and liquefied petroleum gas (LPG). Petrol and diesel are the major liquid fuels that are used in South Africa.
The retail price of petrol is fully regulated by Government providing for allowable returns along the value chain for petrol as well as levies and duties that accrue to the fiscus. South African petroleum prices are based off the Basic Fuel Price which is a formula that represents the realistic, market-related costs of importing a substantial portion of South Africa’s liquid fuels requirements, and it is therefore deemed that such supplies are sourced from overseas refining centres capable of meeting South Africa’s requirements in terms of both product quality and sustained supply considerations.This means that the domestic price is influenced by supply and demand for petroleum products in international markets, combined with the rand/dollar exchange rate.
Refined petroleum products are produced by the following methods:
- crude oil refining;
- coal-to-liquid fuels and gas-to-liquid fuels (Sasol); and
- natural gas to liquid fuels (PetroSA).
There are six refineries in the country – four on the coast and two inland.
Demand & Supply
Crude oil is refined at South Africa’s four crude oil refineries. The table below shows the development of South Africa’s refining capacity (barrels per day) from 1994 to 2000
Distribution
Petroleum products are moved from refineries by pipelines, rail, sea and road to approximately 200 depots, 4 000 service stations and 100 000 direct consumers who are mostly farmers.
South African Refinery Ownership and crude throughput
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Crude oil refined at the following refineries:
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Name
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Crude throughput (2013)
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Ownership
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Astron Energy
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100 000 barrels per day
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Astron Energy
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Enref
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120 000 barrels per day
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Engen Petroleum
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Natref
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108 000 barrels per day
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Sasol/TotalEnergies (64%/36%)
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Sapref
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180 000 barrels per day
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Shell South Africa/BP Southern Africa (50%/50%)
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Coal and gas processed and refined at:
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Sasol Secunda
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150 000 barrels per day
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Sasol
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(Crude equivalent at average yield)
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Gas processed and refined at:
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PetroSA
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45 000 barrels per day
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PetroSA
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(Crude equivalent at average yield)
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Wholesaling
BP Southern Africa, Astron Energy, Engen Petroleum, PetroSA, Sasol Oil, Shell South Africa and TotalEnergies South Africa are the main players in the South African oil industry. They operate storage terminals and distribution facilities throughout the country. Until recently, there were very few non-refining wholesalers supplying petrol and diesel in South Africa. Today, there are a number that are registered with the Department of Mineral Resources and Energy.
Retailing
There are approximately 4 000 service stations (forecourts – company owned and dealer owned) in South Africa. The Petroleum Products Amendment Act of 2003 brought in a licensing regime covering manufacturing, wholesaling and retailing that require adherence to a number of regulatory requirements as well as annual reporting of specific information to the Department of Mineral Resources and Energy. Manufacturers and wholesalers are prohibited from holding a retail licence except for training purposes and thus SAPIA members are restricted to a limited number of retail licences. Branded sites essentially operate through SAPIA members franchising a service station to an independent dealer and supply it directly with petroleum products under contract. There are also stations that are independently operated and unbranded and those independently owned but branded under contract with the oil company supplying it with petroleum products.
Industry role players
The major role players in the South African liquid fuels market are government and its associated institutions, as well as SAPIA members. The Department of Mineral Resources and Energy (DMRE) is responsible for ensuring the secure and sustainable provision of energy for socio-economic development. Through institutions like the Central Energy Fund (CEF) and the National Energy Regulator of South Africa (NERSA), the government plays a significant role in the South African liquid fuels market.