Minister of Mineral and Petroleum Resources Gwede Mantashe wants to crank up local refining capacity at a time when bombs are targeting oil infrastructure in the war involving Israel, the US and Iran, driving prices above $100 a barrel.
South Africans are bracing for a sharp rise in fuel prices at the beginning of April due to higher oil prices and a weak rand.
Speaking at the Southern Africa Oil and Gas Conference in Cape Town on Monday, Mantashe said rising oil and gas prices impact the cost of living and create energy inequality.
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This requires increasing fuel refining capacity inside SA, beyond the existing Natref, Astron Energy and Sasol Secunda refineries, he added.
Several pieces of legislation are being lined up to help accomplish this, including the Upstream Petroleum Resources Development Act and the Petroleum Products Act, both aimed at accelerating local energy production and reducing reliance on imports.
New SOE
The state-owned South African National Petroleum Company (SANPC) has been created to amalgamate the assets of the Strategic Fuel Fund, iGas contracts, and the viable portions – but not the liabilities – of PetroSA.
The new company falls under the Central Energy Fund and is intended to create the scale and efficiency denied under the previous structure.
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Not everyone sees this as a solution to SA’s energy problems. The Democratic Alliance sees the new state-owned energy company as a “super state-owned entity (SOE)” that will repeat the failures of other SOEs due to mismanagement and underperformance.
Leaving the non-viable assets behind in PetroSA means the taxpayer will have to foot the bill for some gigantic flops, such as the Ikhwezi gas project, where lack of oversight and poor governance led to a R14.5 billion asset impairment in 2016.
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“There is no cogent plan where the numbers make sense. It will require a political decision for the economics to make sense,” said one analyst who asked not to be named.
Mantashe said the supply disruptions caused by the Middle East war require rigorous exploration and responsible exploitation of SA’s own petroleum resources, but these efforts have consistently been blocked by environmental groups.
SA has considerable offshore petroleum potential, including gas discoveries in the Outeniqua Basin, as well as oil discoveries in Namibia’s Orange Basin, which geological evidence suggests may extend southwards into South African waters.
“Regrettably, we have not yet been able to fully explore and exploit this potential due to ongoing blockages against oil and gas development in the name of environmental protection,” said Mantashe.
Exploration has stalled at Shell’s Northern Cape Ultra Deep Block and TotalEnergies’ Deep Water Orange Basin following 2025 high court decisions that overturned environmental authorisations for both projects.
These decisions have been appealed, though last week Minister of Forestry, Fisheries and the Environment Willie Aucamp undertook to review these appeals to avoid decision paralysis.
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TotalEnergies has warned it may freeze its projects in SA due to what it described as “unacceptable” delays.
“Countries that rely heavily on imports of refined petroleum products remain particularly vulnerable to global market shocks,” said Mantashe, adding that engagements are taking place with industry players to ensure uninterrupted fuel availability without immediately tapping into SA’s strategic reserves.
In 2010, SA produced about 600 000 barrels of crude and synthetic fuel a day from six refineries, but that has fizzled to roughly half since then as several refineries shut down due to the estimated R40-60 billion in upgrades needed to meet cleaner fuel standards.
At its peak, SA produced 80% of the refined fuel consumed locally. That has since declined to 35%, with imports accounting for 18.7 billion litres a year.
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Only two crude refineries are currently operational – Astron Energy in Cape Town and Natref in Sasolburg, which combined produce more than 200 000 barrels a day (bpd). Sasol’s Secunda facility produces about 150 000bpd in synthetic fuels.
Read: Sasol earnings plunge 95% as impairments hammer profitability
There’s a growing reliance on diesel imports from Nigeria’s Dangote refinery, with refined fuel coming largely from India, the Middle East and “teapot” refineries in China, where environmental standards are low.
About half of SA’s refining capacity is currently shut down.
Source: Bloomberg
“The big challenge is getting the Sapref refinery up and going again,” said one analyst. “It was completely destroyed in the flood here in Durban.”
Sapref was acquired in 2024 from Shell and BP by the state-owned Central Energy Fund, which has plans to rehabilitate and scale it from the original 180 000 bpd to more than 400 000 bpd.
The restart has yet to break ground, prompting questions about legacy costs and the economics of the planned refinery project.
Regulatory changes
Great hope is pinned on the Upstream Petroleum Resources Development Act – which removes oil and gas regulation from the dead hand of the Mineral and Petroleum Resources Development Act, where administrative inertia and cumbersome regulations created investor ennui.
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The new act creates a single ‘right’ for oil and gas exploration and production, rather than separating them as is the case in mining. The newly created Petroleum Agency of South Africa (Pasa) will promote fair competition with, it is hoped, speedy allocation of rights.
Read: Government wants oil and gas exploration accelerated
Mantashe highlighted the draft Petroleum Products Bill, which will improve licensing efficiencies for downstream activities and is intended to promote transformation, as well as the adoption of cleaner fuels and manufacturing processes.
Shale gas regulations coming
Shale gas development has been on hold while environmental regulations were being developed, and these now appear to be imminent.
“I am pleased to report that last week we held a constructive engagement with the ministers responsible for Environmental Affairs and Water and Sanitation to chart a way forward,” said Mantashe.
“Following extensive discussions, the ministers undertook to finalise and gazette the required regulations in the next few months. As per our previous commitment, the department stands ready to lift the moratorium immediately after these regulations are promulgated.”
South Africa must not stand on the sidelines while the global energy landscape evolves and while our neighbouring countries unlock the value of their resources, concluded Mantashe.
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