Engen has confirmed that it will be proceeding with its plan to convert its Durban refinery into a storage facility and terminal.
In a statement issued today (23 April), Engen said the decision has been taken after ‘an extensive strategic evaluation’ of its refining business, in which ‘every facet of the refinery was scrutinised and assessed against market demand, future growth potential and the ability to contribute sustainably’.
The 120,000 barrels a day (b/d) plant is South Africa’s second biggest refinery but its production has been disrupted as a result of a fire in December.
Yusa’ Hassan, Engen Managing Director and CEO, commented: ‘The conclusion of the strategic assessment is that the Engen refinery is unsustainable in the longer-term. This is primarily due to the challenging refining environment as a result of a global product supply surplus and depressed demand, resulting in low refining margins, and placing the Engen refinery in financial distress. Furthermore, unaffordable capital costs to meet future CF2 regulations compliance continues to be a challenge for the long-term sustainability of the refinery.’
Engen said that the refinery to terminal (RTT) commissioning is anticipated to be in Q3 2023.
Located in the south of Durban and commissioned in 1954, the Engen facility is the oldest refinery in the country and – according to the company – it is responsible for approximately 17% of the country’s fuel production. The plant has also been an important source of fuel for the local bunker market.
Engen pointed that the refinery’s 120,000 b/d production ranks it as a’ low capacity, medium complexity facility with limited upgrading potential’ – which would struggle to compete in the current global refinery landscape of ‘mega sized, integrated, and complex refineries, many of which operate in countries that are primary suppliers of crude’.
Hassan summarised: ‘After modelling multiple scenarios in consultation with external international sector specialists, it has become very clear that the Engen refinery is not commercially viable. In view of this, company leadership has recognised that the Engen refinery cannot move forward in its current structure. We must safeguard the long-term sustainability of the Engen business; therefore, we are proceeding with the conversion to a terminal.’