Saudi Arabia Plans Oil Refinery, Petchem Plant In South Africa

Saudi Arabia plans to build an oil refinery and petrochemicals plant in South Africa as part of $10 billion of investments in the country, Saudi Energy Minister Khalid al-Falih said on Jan. 18 after talks with his South African counterpart.

The announcement is a much-needed vote of confidence in Africa's most industrialized economy, where President Cyril Ramaphosa is trying to attract $100 billion of new investments to rekindle growth.

The new refinery would reduce the need for refined product imports and cement Saudi Arabia's dominant position in South Africa's oil sector. The Gulf kingdom already supplies 40% of the crude oil consumed in South Africa.

"Saudi Aramco and South Africa's Central Energy Fund are moving forward with the feasibility study and identifying the parameters of the project," Falih told reporters in Pretoria, South Africa's administrative capital.

South African Energy Minister Jeff Radebe said a location for the refinery and petrochemicals plant would be finalized in the coming weeks. The capacity for the refinery is yet to be determined.

South Africa has talked about building an extra refinery for a decade, but it has struggled to agree commercial terms with investors.

It has six refineries, four using crude oil and two synthetic fuel as feedstock. Royal Dutch Shell, BP , Total and Sasol are among major refinery operators.

Falih said Saudi Arabia had held discussions with Ramaphosa's predecessor, Jacob Zuma, about building a refinery in South Africa but the proposed location was not attractive.

The two governments are now considering Richard's Bay in KwaZulu-Natal province, home to South Africa's major coal export terminal, among potential locations for the refinery.

State oil giant Saudi Aramco is also studying whether to use South African oil storage facilities in Saldanha Bay, while Saudi power firm Acwa Power is looking at investing in South Africa's revamped renewable energy program.

Falih confirmed there were discussions about the kingdom investing in South African state defense company Denel, as exclusively reported by Reuters in November.