South Africa: Petro SA Downstream Project Funded

Plans for the Petro SA  refinery, a key move to ensure liquid fuels security of supply for South Africa was initially estimated at $11bn. But PetroSA CEO Sipho Mkhize last week said the capital expenditure costs for the project had fallen 25% because of the global economic meltdown.

PetroSA’s vice-president for new ventures — midstream Jorn Falbe said last week that global economic conditions had reduced flexibility in the funding “but funding is still feasible. By reduced flexibility, I mean we do not have so many options in the commercial bank sector.” He said a big portion of the funding would come from export credit agencies “which has been part of PetroSA’s funding strategy from the beginning”.

“Right from the beginning, the project was designed that way. Out of this debt financing, export credit agencies financing will cover a big portion of this. That is why it is important that we design the project structure such that we can access global funding. HSBC will guide on integrating the financing element into the procurement process,” Falbe said. HSBC is PetroSA’s financial adviser on the project. He said the financial model for the project would be finalised in the middle of next month.

Meanwhile, Falbe said PetroSA had decided to change the configuration of the refinery in a move that has substantially reduced the project’s forecast costs. He said the decision to change the project’s configuration followed a meeting with the project’s engineering contractor US-based engineering firm KBR and UK-based KBC Advanced Technologies, the technical and commercial adviser for the project.

PetroSA was open to partnerships in the project “as long as they are complementary and help us execute this project”, he said.

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