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Chevron says South Africa needs fair clean-fuel cost recovery
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Written by Bloomberg - 27/05/2015 7:59 am
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South Africa, which sets gasoline prices that fuel producers can charge, needs to ensure companies can fairlyrecover the cost of upgrading their facilities to handle cleaner fuels, Chevron Corp.’s local unit said.
“Petroleum companies are unable through normal market mechanisms to recoup the investments needed to
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upgrade refineries to produce cleaner fuels,” Chevron South Africa Chairwoman Nobuzwe Mbuyisa said in ane-mailed response to questions Tuesday.
The costs “are substantial and, in the absence of a mechanism to recover these costs from the consumer, they aresimply not commercially viable,” she said.
Upgrading Chevron’s facility in Cape Town to meet planned clean-fuel standards will cost as much as $1 billion,Mbuyisa said last month.
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Refiners are refusing to invest in production of cleaner fuels without a subsidy, Rod Crompton, a member of theNational Energy Regulator of South Africa, told lawmakers Tuesday.
About 40 billion rand ($3.3 billion) will be needed over five years to upgrade South Africa’s six refineries tomeet new fuel specifications that will reduce vehicle emissions, the National Treasury said in its 2013 budgetreview.
It said basic fuel prices would be adjusted to accommodate the cost recovery.
In draft regulations released in March 2011, the government said sulfur levels in fuel should be cut to 10 partsper million from a maximum of 500 parts, while the benzene content should be reduced to 1 percent from 5percent.
At that time, the oil industry estimated it would cost about $3.1 billion for all refineries to comply with Euro 4fuel standards, or $3.7 billion to meet Euro 5 standards.
Euro 4 standard gasoline contains no more than 50 parts per million of sulfur, while Euro 5 has no more than 10parts.
While the Energy Ministry wanted clean fuels to be available from this year and all refineries to be revamped by2017, upgrades have been delayed amid disagreement over who will pay.
Petroliam Nasional Bhd.’s Engen unit, Royal Dutch Shell Plc and BP Plc are among the companies that operateplants in South Africa.
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