According to Oil and Gas Journal (OGJ), South Africa had proven oil reserves of 15 million barrels as of January 2007. All of the proven reserves are located offshore southern South Africa in the Bredasdorp basin. In 2006, South Africa produced 200,000 barrels per day (bbl/d) of oil, of which 30,000 bbl/d was crude oil, and 170,000 bbl/d consisted of mostly synthetic liquids from coal and natural gas. Over 50 percent of South Africa’s oil consumption is imported. In 2006, South Africa consumed 519,000 bbl/d of oil, and imported 319,000 bbl/d of oil. According to the South African Petroleum Industries Association (SAPIA), the majority of crude oil imports destined for South African refineries come from the Middle East, with Iran and Saudi Arabia as the country’s chief suppliers. Nigeria and Angola (among others) also supply crude oil to South Africa.

In 2005, South Africa launched the National Energy Regulator of South Africa (NERSA). NERSA regulates policy over the entire South African energy industry and is responsible for implementing South Africa’s energy plan. South Africa also has a national oil and natural gas company, the Petroleum Oil and Gas Corporation of South Africa (PetroSA). PetroSA is responsible for managing and promoting the licensing of oil and natural gas exploration in the country. This includes both onshore and offshore exploration. International oil companies (IOCs) involved in South Africa’s upstream oil sector include Anschutz International, BHP Billiton, Forest Oil International, and Pioneer Natural Resources.

In February 2007, the South African government indicated that it would consult with the oil industry over a windfall tax on Sasol and PetroSA profits when oil prices reach $45 - $55 per barrel. The government believes the tax could provide cheaper fuel prices to local consumers, and the government will most likely make a final decision on the tax by July 2007. Sasol and PetroSA have argued against the tax, saying that it would harm investor confidence at a time when South Africa needs to expand its refining capacity to meet future energy demand

The most prolific of South Africa’s exploration blocks is Block 9 in the Bredasdorp Basin. PetroSA has made several discoveries on the block, including the Oribi, Oryx and Sable fields. PetroSA and Energy Africa began producing oil in 1997 at the Oribi field, which was followed by the Oryx and Sable fields in 2000 and 2003, respectively. PetroSA and Pioneer developed Sable under a joint partnership. The field has six subsea wells connected to a floating, production, storage and offloading vessel (FPSO) with the capacity to process 60,000 bbl/d of oil, re-inject 80 million cubic feet per day (MMcf/d) of natural gas and recover natural gas liquids (NGLs). In 2003, the fields produced 58,000 bbl/d of crude oil total; however, due to steady declines, the fields currently produce around 30,000 bbl/d of crude.

South Africa would like to locate additional oil reserves and increase oil production in the country. In 2007, South Africa will auction four offshore blocks for exploration. In addition, BHP-Billiton plans to drill for oil in offshore acreage in western South Africa.

According to OGJ, South Africa has the second largest refining capacity in Africa (488,297 bbl/d), surpassed only by Egypt (726,250) as of January 2007. South Africa’s refined products are sold in the local market and exported within Southern Africa and in the Indian and Atlantic Basins. Major refineries include Sapref (172,000 bbl/d) and Enref (118,750 bbl/d) in Durban, Calref (110,000 bbl/d) in Cape Town, and Natref (87,547 bbl/d) at Sasolburg.

IOCs, including BP, Chevron, Engen, Shell, and Total are major participants in South Africa’s downstream petroleum markets. Several domestic firms are also involved, including Naledi Petroleum and Afric Oil. Worldwide Africa Investment Holdings (WAIH) owns 55 percent of Afric Oil, 51 percent of South African Zenex, and 20 percent of Engen.

In 2005, Drako Oil and Energy announced the proposed construction of a 300,000 bbl/d refinery at Richards Bay in the KwaZulu-Natal province. The facility would have a 6.2 million barrel storage capacity and would be linked to the Petronet pipeline system. Crude oil for the facility would most likely come from Algeria or the UAE. Late in 2006, Drako Oil and Energy applied at the South African Department of Minerals and Energy for a license to proceed on the refinery project.

On January 1, 2006 South Africa switched to unleaded fuels in motorized vehicles. Prior to the fuel switch, an estimated 60 percent of South African vehicles were leaded fuel users. The South African government, under the clean fuels policy, paid to have older vehicles adapted for unleaded fuel. In addition, diesel fuel used in South Africa after January 1, 2006 has ultra-low sulfur content of 0.005 – 0.05 percent, increasing its cost by $0.11 per gallon.

South Africa has a highly developed synthetic fuels industry supported by abundant coal resources, offshore natural gas and condensate production in Mossel Bay, and natural gas imports from Mozambique. Sasol, with a capacity of 160,000 barrels per day (bbl/d) from coal-to-liquids (CTL), and PetroSA, with a capacity of 45,000 bbl/d from gas to liquids (GTL), are the major producers of synthetic fuel in South Africa. Together, the two firms supply approximately 40 percent of the South African fuels market.

Sasol is the world’s largest manufacturer of oil from coal. Sasol uses coal-to-liquids (CTL) technology, which makes synthetic gas from low-grade coal at liquefaction plants located at the Secunda and Sasolburg refineries. The synthetic gas is then converted into pipeline gas and liquid fuels, which include liquefied petroleum gas (LPG), jet fuel, kerosene and petrochemicals. As of December 2006, Sasol was considering the possibility of constructing an additional 80,000 bbl/d synthetic fuels refinery, which would be located close to the Waterberg coal deposits near Gauteng. The South African government would like to see the refinery built as it would help satisfy future energy demand in the county, while helping to reduce foreign oil imports.

In July 2005, Anglo American’s Isibonelo coal mine produced its first coal for shipment to Sasol’s Segunda refinery. The $65 million project suppies 5 million short tons (Mmst) of thermal coal annually to Sasol Synthetic Fuels since reaching full production in late 2006. Anglo America and Sasol also announced plans to develop the Kriel South coalfield. Anglo will establish an operation on the northern portion of the field, and Sasol plans to expand its existing underground operations at the Syferfontein colliery (coal mine). Coal from the two operations is expected to supply Sasol’s refinery for the next 20 years.

State-owned PetroSA began synfuel production in 1993 at its Mossel Bay GTL refinery, which is the largest GTL plant in the world. The plant receives natural gas and condensate feedstock from the FA, EM, and EBF fields in Mossel Bay through a pair of 56-mile pipelines. PetroSA converts the natural gas into a variety of liquid fuels, which include motor gasoline, distillates, kerosene, alcohols and LPG. Due to declining domestic natural gas production, PetroSA and Pioneer plan to further develop existing natural gas resources at Sable oil field and six adjacent undeveloped fields. Initial production from the development is set to begin in the third quarter of 2007, with the hope of prolonging the lifespan of the Mossel Bay GTL refinery.