BP to invest R5 billion in South African operation

A BP refinery

BP will invest nearly R5 billion in South Africa as a sign of its faith in the direction in which the country is heading, the energy company said on Tuesday.

“With the improving investment climate, especially policy stability… being presented in Southern Africa, BP has decided to invest significantly for the benefit of all of our stakeholders,” British Petroleum (BP) refining and marketing chief executive Iain Conn told reporters in Johannesburg.

“It gives me great pleasure to announce that BP will be investing in excess of R5bn in Mozambique and South Africa over the next five years, commencing in 2013, which will be new plant and infrastructure upgrades.”

It would be funded from BP cash reserves. Conn said R800 million would be invested in Mozambique and R4.7bn in South Africa.

“This investment is designed to improve safety, customer experience, operational efficiency, help with government to improve energy security, and enable the transition towards cleaner fuels.”

Conn said R2.5bn would be invested in upgrading refinery infrastructure at the SAPREF refinery, its joint venture with Shell in KwaZulu-Natal.

“Most of these funds in the refinery are to be utilised to promote South Africa’s clean fuels requirement,” he said.

In February, Finance Minister Pravin Gordhan announced a support mechanism for biofuels and an upgrade of refineries to encourage South Africa to produce cleaner fuels.

“We anticipate that the remuneration mechanism will be finalised shortly, as we have already started to invest in the project and our intent is to be ready to produce clean fuels in 2017,” Conn said.

Over R1bn would be invested in terminals in South Africa and Mozambique.

The balance of the investment would be in the “retail network”. Conn said BP had partnered with Pick ‘n Pay and 120 Pick ‘n Pay express stores would be opened in the next five years.

He said the investment was approaching five percent of all the capital which went into the marketing, refining, and chemical business of BP.

“We are in about 70 countries, and South Africa is going to end up with nearly five percent of the money. I think that tells you something.”

BP was encouraged by development in South Africa and Mozambique.

“In South Africa, I am conveying our appreciation to the government for adopting the National Development Plan as the blueprint for tackling the many challenges that continue to face this great nation.”

Conn said BP was committed to transformation and the need to create more jobs and build entrepreneurs in South Africa.

“This is part of our on-going efforts to be a good corporate citizen as we pursue our business objectives in all the markets in which we operate.”

Conn said BP was not considering fracking for shale oil and gas in South Africa.

“We have been fracking since the 1940s. BP is in shale, but not here,” he said.

“We are looking at shale in a number of places in the world, including China. We have not as yet prioritised shale in South Africa.”

He said fracking needed to be done safely and its impact on the environment needed to be considered.

Fracking, or hydraulic fracturing, is the process of extracting natural gas from shale rock layers deep within the earth.

Mineral Resources Minister Susan Shabangu said last year that five companies had applied in 2010 to explore for shale gas in the Karoo.

Energy department director general Nelisiwe Magubane said on Tuesday government “endorsed and welcomed” BP’s investment.

BP’s SAPREF refinery is co-owned with Royal Dutch Shell. South Africa’s oil refineries process 497,000 bpd, with SAPREF contributing 36 per cent of this total, according to the South African Petroleum Association’s website.- Sapa & Praag