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BP and Shell likely to ask South Africa to buy stake.

LONDON: Royal Dutch Shell and BP may ask South Africa to purchase a stake in their jointly-owned Sapref oil refinery, the country's largest, at a February 25 meeting with the energy minister, a BP official said.

"It's true that it is one of the proposals on the table," Joe Mahlo, BP's South African spokesman, said by mobile phone yesterday. Johannesburg-based newspaper Business Report first reported the plan. Mahlo declined to say what other options are

being considered.

A proposal was made to the government in November, Shell said in an e-mailed response to queries, adding it will be discussed 'further' with the government next month.

Oil companies are considering their future in the country, Africa's biggest economy, in the face of increasing competition as the national oil company, PetroSA, plans to build a refinery about twice the size of the Sapref plant.

The refinery stake purchase is 'not necessarily' an alternative to PetroSA's project, Mahlo said. "There is a timing issue - one can do the easy things first." BP won't provide further details of the proposal at this stage, he said.

Economic expansion

Sapref, in the east coast port city of Durban, has a crude oil capacity of about 180,000 barrels a day. PetroSA's Mthombo refinery would produce about 400,000 barrels a day on the southeast coast and could be built at a cost of about $10 billion, PetroSA said last year.

PetroSA started studying Mthombo, which would be Africa's largest oil refinery, about four years ago as gasoline and diesel imports rose on the back of economic expansion. Demand exceeded local refinery output for the first time in 2007. South Africa has six refineries with a combined capacity of about 692,000 barrels a day, according to data from the South African Petroleum Industry Association.

Annual fuel demand is about 26 billion litres versus supply of about 24 billion litres, according to Engen data.

PetroSA completed a feasibility study on Mthombo last year and submitted it to the government for approval.

South Africa's fuel demand shortfall is not yet big enough to warrant a large new refinery and could cause the closure of existing local plants if it's built too soon, Engen, the local unit of Petronas Nasional, said in November.

Muscat Press and Publishing House SAOC 2011

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Publication:Times of Oman (Muscat, Oman)
Geographic Code:6SOUT
Date:Jan 20, 2011
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