ArcelorMittal to close Saldanha steel plant

Within hours of Anglo American-controlled Kumba Iron Ore (KIO) dropping the bombshell that it wanted payment in advance for higher interim iron-ore prices, South Africa's largest steelmaker ArcelorMittal (AMSA) announced that it was taking immediate steps to close its Saldanha export steel works and to cut domestic steel production drastically, which puts 3 000 to 4 000 jobs at risk, and which leaves the South African government "gravely concerned".

After five months of barren negotiations between JSE-listed KIO and AMSA – which chose not to take up a government mediation offer – the saga took a new turn at the weekend when KIO insisted that AMSA, from August 1, pays KIO subsidiary, Sishen Iron Ore Company (SIOC), in advance for iron-ore supplies, and settles outstanding debts brought about by the higher interim iron-ore prices that KIO has been unilaterally imposing.

South Africa's Department of Trade and Industry called on both parties – "as a matter of urgency" – to resolve the dispute in a manner that did not lead to negative economic circumstances for the country and said it continued to be available to mediate.

A meeting between Trade and Industry Minister Dr Rob Davies, KIO and AMSA is reported by Bloomberg News to be on the cards.

But AMSA said that, although supplies of 2,5-million tons of iron-ore a year would continue from SIOC's Thabazimbi iron-ore mine at the cost-plus-3% price, and that scrap metal feedstock would also continue to be supplied, those inputs would be insufficient to meet current sales orders and future steel demand.

As a consequence, AMSA CEO Nonkululeko Nvembezi-Heita said that AMSA had initiated plans for:

• the immediate closure of AMSA's Saldanha export steel plant at the coast;
• the curtailment of all exports; and
• a drastic reduction in steel production for South Arica's domestic market, resulting in market allocations.

A spokesperson told Engineering News Online that AMSA, which employs 10 000 people, had already begun communicating the looming job losses with labour unions.

Nyembezi-Heita said: "I'm profoundly disturbed with Kumba's decision as it will have a wider impact on the economy of South Africa. It will result in definite job losses in our business and the downstream industries. At this stage, I am expecting that about 3 000 to 4 000 jobs will be affected."

SIOC had earlier requested AMSA to pay into an escrow account the difference between the disputed "cost-plus-3%" portion of the price and the market price, but AMSA did not take up the offer.

AMSA did, however, impose a R600/t steel surcharge to cover the higher price from May 1.

KIO made a second July 15-deadline discounted-price offer to AMSA, which the steelmaker again did not take up.

Now KIO, headed by CEO Chris Griffith, said that its SIOC would only load trains destined for AMSA's plants on condition that payment - based on its second discounted-price proposal - was made on a "pay-and-take" basis. The discounted price SIOC offered was $50/t for AMSA's Saldanha coastal steel plant and $80/t for its inland Vanderbijl and Newcastle steel plants.

That would apply from August 1, from which date AMSA would have to prepay at least 48 hours in advance.

By that date, AMSA would also have to have paid up the accumulated amounts due for the iron-ore delivered between March 1 and July 15 at a higher interim price.

AMSA said that, while the $50/t would have been sufficient to keep the Saldanha plant at a financial break-even point, the $80/t would result in the possible closure of its inland steel works.

The $50/t amounted to a 69% increase over the cost-plus-3% iron-ore price and the $80/t price an increase of 171%.

Nyembezi-Heita added that steel prices had declined by $100/t since AMSA's interim pricing negotiations had begun with KIO in March.

South Africa's Department of Trade and Industry said in a media release that it was "gravely concerned" about the KIO announcement and that the dispute between KIO and AMSA should not result in iron-ore previously processed locally being exported in unbeneficiated form.

The department also did not want to see any disruption of local steel production nor did it want the dispute to result in the domestic steel price rising above internationally uncompetitive levels.

During the negotiation period, SIOC has continued to deliver iron-ore to AMSA, but the steelmaker has not paid the invoiced price reflecting the higher interim price, but has instead continued only to remit the cost-plus-3% price.

SIOC delivered 337 402 t of iron-ore to AMSA's Saldanha plant and 1 115 180 t of iron-ore to AMSA's inland plants from March 1 to June 30.

"There is considerable commercial risk to SIOC and its shareholders if it continues to supply iron-ore to AMSA without an agreement on the terms of supply," KIO said in a Stock Exchange News Service announcement.

KIO notified AMSA in February that it was no longer entitled to receive 6,25-million tons a year of Sishen iron-ore at the cost-plus-3% arrangement because of AMSA failing to convert its old-order mining rights to new-order mining rights.

KIO attempted to acquire AMSA's former rights, but these were awarded instead to Imperial Crown Trading, which KIO is contesting in the North Gauteng High Court.

The cost-plus-3% agreement has been in place since 2001 based on AMSA's now-forfeited ownership of an undivided 21,4% interest mineral rights at the Sishen mine, which KIO contends became inoperative from May 1, 2009 – a matter which has been referred to arbitration.

However, AMSA has yet to file its answering papers to SIOC's statement of claim.

An AMSA spokesperson told Engineering News Online that the filing of its answering papers was now imminent and that the company's arbitrator had been appointed.

Pending the outcome of the arbitration, SIOC has invoiced AMSA at the higher interim price price and AMSA has charged South African steel consumers R600/t more for steel.

Meanwhile, South Africa's Competition Commission is giving "priority attention" to dealing with AMSA's unilateral imposition of the R600-plus surcharge on every ton of steel sold domestically.

A preliminary investigation is under way into the possibility that the surcharge may constitute an abuse of dominance.

Edited by: Creamer Media Reporter
Source engineeringnews.co.za

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ArcelorMittal to close Saldanha steel plant

Within hours of Anglo American-controlled Kumba Iron Ore (KIO) dropping the bombshell that it wanted payment in advance for higher interim iron-ore prices, South Africa's largest steelmaker ArcelorMittal (AMSA) announced that it was taking immediate steps to close its Saldanha export steel works and to cut domestic steel production drastically, which puts 3 000 to 4 000 jobs at risk, and which leaves the South African government "gravely concerned".

After five months of barren negotiations between JSE-listed KIO and AMSA – which chose not to take up a government mediation offer – the saga took a new turn at the weekend when KIO insisted that AMSA, from August 1, pays KIO subsidiary, Sishen Iron Ore Company (SIOC), in advance for iron-ore supplies, and settles outstanding debts brought about by the higher interim iron-ore prices that KIO has been unilaterally imposing.

South Africa's Department of Trade and Industry called on both parties – "as a matter of urgency" – to resolve the dispute in a manner that did not lead to negative economic circumstances for the country and said it continued to be available to mediate.

A meeting between Trade and Industry Minister Dr Rob Davies, KIO and AMSA is reported by Bloomberg News to be on the cards.

But AMSA said that, although supplies of 2,5-million tons of iron-ore a year would continue from SIOC's Thabazimbi iron-ore mine at the cost-plus-3% price, and that scrap metal feedstock would also continue to be supplied, those inputs would be insufficient to meet current sales orders and future steel demand.

As a consequence, AMSA CEO Nonkululeko Nvembezi-Heita said that AMSA had initiated plans for:

• the immediate closure of AMSA's Saldanha export steel plant at the coast;
• the curtailment of all exports; and
• a drastic reduction in steel production for South Arica's domestic market, resulting in market allocations.

A spokesperson told Engineering News Online that AMSA, which employs 10 000 people, had already begun communicating the looming job losses with labour unions.

Nyembezi-Heita said: "I'm profoundly disturbed with Kumba's decision as it will have a wider impact on the economy of South Africa. It will result in definite job losses in our business and the downstream industries. At this stage, I am expecting that about 3 000 to 4 000 jobs will be affected."

SIOC had earlier requested AMSA to pay into an escrow account the difference between the disputed "cost-plus-3%" portion of the price and the market price, but AMSA did not take up the offer.

AMSA did, however, impose a R600/t steel surcharge to cover the higher price from May 1.

KIO made a second July 15-deadline discounted-price offer to AMSA, which the steelmaker again did not take up.

Now KIO, headed by CEO Chris Griffith, said that its SIOC would only load trains destined for AMSA's plants on condition that payment - based on its second discounted-price proposal - was made on a "pay-and-take" basis. The discounted price SIOC offered was $50/t for AMSA's Saldanha coastal steel plant and $80/t for its inland Vanderbijl and Newcastle steel plants.

That would apply from August 1, from which date AMSA would have to prepay at least 48 hours in advance.

By that date, AMSA would also have to have paid up the accumulated amounts due for the iron-ore delivered between March 1 and July 15 at a higher interim price.

AMSA said that, while the $50/t would have been sufficient to keep the Saldanha plant at a financial break-even point, the $80/t would result in the possible closure of its inland steel works.

The $50/t amounted to a 69% increase over the cost-plus-3% iron-ore price and the $80/t price an increase of 171%.

Nyembezi-Heita added that steel prices had declined by $100/t since AMSA's interim pricing negotiations had begun with KIO in March.

South Africa's Department of Trade and Industry said in a media release that it was "gravely concerned" about the KIO announcement and that the dispute between KIO and AMSA should not result in iron-ore previously processed locally being exported in unbeneficiated form.

The department also did not want to see any disruption of local steel production nor did it want the dispute to result in the domestic steel price rising above internationally uncompetitive levels.

During the negotiation period, SIOC has continued to deliver iron-ore to AMSA, but the steelmaker has not paid the invoiced price reflecting the higher interim price, but has instead continued only to remit the cost-plus-3% price.

SIOC delivered 337 402 t of iron-ore to AMSA's Saldanha plant and 1 115 180 t of iron-ore to AMSA's inland plants from March 1 to June 30.

"There is considerable commercial risk to SIOC and its shareholders if it continues to supply iron-ore to AMSA without an agreement on the terms of supply," KIO said in a Stock Exchange News Service announcement.

KIO notified AMSA in February that it was no longer entitled to receive 6,25-million tons a year of Sishen iron-ore at the cost-plus-3% arrangement because of AMSA failing to convert its old-order mining rights to new-order mining rights.

KIO attempted to acquire AMSA's former rights, but these were awarded instead to Imperial Crown Trading, which KIO is contesting in the North Gauteng High Court.

The cost-plus-3% agreement has been in place since 2001 based on AMSA's now-forfeited ownership of an undivided 21,4% interest mineral rights at the Sishen mine, which KIO contends became inoperative from May 1, 2009 – a matter which has been referred to arbitration.

However, AMSA has yet to file its answering papers to SIOC's statement of claim.

An AMSA spokesperson told Engineering News Online that the filing of its answering papers was now imminent and that the company's arbitrator had been appointed.

Pending the outcome of the arbitration, SIOC has invoiced AMSA at the higher interim price price and AMSA has charged South African steel consumers R600/t more for steel.

Meanwhile, South Africa's Competition Commission is giving "priority attention" to dealing with AMSA's unilateral imposition of the R600-plus surcharge on every ton of steel sold domestically.

A preliminary investigation is under way into the possibility that the surcharge may constitute an abuse of dominance.

Edited by: Creamer Media Reporter
Source engineeringnews.co.za

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Parts for nuclear reactor to be stored in Saldanha Bay

The government has pulled the plug on its ambitious nuclear energy programme after pumping more than R9-billion into it over more than 11 years.

In a letter dated July 5, Public Enterprises Minister Barbara Hogan told the National Union of Mineworkers (NUM): "The minister of finance has clearly stated that there will be no further funding for the company, and I would like to reiterate that this position has not changed.

"It is clear that the remainder of the cash on hand is to be utilised solely for the winding down of the company as well as the preservation of the intellectual property."

One objective was to design, license and build a prototype nuclear reactor plant, which, if successful, would have paved the way for building small power plants to help meet SA's needs.

The company operates as an independent entity governed by an agreement between founding investors Eskom, the Industrial Development Corporation (IDC) and US nuclear giant Westinghouse.

It has spent R5-billion on projects since 1994, including R2.7-billion on a demonstration power plant, which was to have been built at the Western Cape's Koeberg nuclear power station, but was later scrapped. In the process, the company wasted R268-million on the manufacture of a major component of the demonstration power plant, a 2000-ton reactor pressure vessel.

The vessel, which is due to leave the Spanish port of Santander next Sunday, will be stored at Saldanha Bay for R10000 a month as the company can no longer afford the R1.4-million it will cost to transport it to Pretoria.

Business Times was told that the company decided to have the component shipped to SA as it would have been liable for R34-million in VAT had it remained in Spain. Nuclear experts were unanimous this week that the vessel would have to be scrapped as the PBMR company changed the original design of the demonstration power plant last year to 200MW from 400MW. The vessel can function in a 400MW power plant only.

Although the part is unfinished, as the contract for its construction was cancelled last year, PBMR was forced to pay the Spanish builder R268-million for the incomplete product. The original contract price was R317-million.

Payments to companies that made parts for the demonstration power plant include:

• R503.2-million to Japan's Mitsubishi Heavy Industries for a helium turbine for the power plant;
• R256.8-million to German company SGL Carbon for manufacturing carbon reflector blocks; and
• R256-million for graphite for the demonstration power plant.

The company also spent millions of rands manufacturing coated uranium oxide particles encapsulated in graphite fuel spheres, which were sent to Russia for testing.

However, staff say the financial cut-off did not stop the company recently giving golden handshakes of R1.8-million each to some of its general managers.

Last year, the company's 11 executives were paid a combined R18-million in salaries and other benefits. Other big payments since 1994 include:

• R2-billion to mostly overseas consultants;
• R115.9-million for building rental;
• R707.9-million for the construction of a pilot fuel plant; and
• R172-million for overheads.

Hogan recently turned down a rescue plan proposed by the NUM that included a request for a R262-million government bail-out until March next year. In a detailed submission to Hogan, the union called on the auditor-general's office to conduct a forensic investigation into the company's financial affairs.

The union also called on the government to suspend the company's board and executive officers. It said some engineers and scientists were "inappropriately qualified" for nuclear reactor engineering applications.

"The actions of certain individuals can be treated as sabotage for changing the design almost every second year. It seemed as if they did not want to see the reactor built."

Union general secretary Frans Baleni deplored the company's "wasteful expenditure. The closure is marked by serious allegations of corruption and unethical conduct. We would be pleased if it can be investigated thoroughly," he said.

A nuclear expert employed at PBMR blamed the board and executives for the company's failure. "The technology in terms of electricity production was good, but the only problem was that it was not well managed. Nothing was ever achieved by the company. It was a waste of taxpayers' money."

Eskom said in a short statement that it was a minority investor, and referred queries to PBMR.

PBMR's acting chief executive Alex Tsela declined to comment, referring all questions to the company's corporate communications department, which could not be reached for comment.

The chairman, Alistair Ruiters, could not be reached for comment either.

Source timeslive.co.za

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Langebaan and Struisbaai fishers granted permits

Langebaan and Struisbaai fishers granted permits

Published in: Legalbrief Today Date: Tue 06 July 2010 Category: In Court Issue No: 2596 Artisanal net fishers from the Langebaan and Struisbaai areas have been granted permits to fish by the Department of Agriculture, Forestry and Fisheries after a protracted court battle, says a Cape Times report. Judge Nathan Erasmus said an order had been made by agreement between the parties to give permits to 41 fishers, who could demonstrate historical dependence and reliance on net fishing. Said Erasmus: 'This order will stand pending the promulgation, implementation and rights allocation in terms of a new policy framework that would accommodate traditional artisanal net fishers in an effective and comprehensive manner...' The parties would report progress about the finalisation of the policy, including the draft, which was to be circulated by 31 July. The report notes the fishers applied to the High Court after the department had failed to provide relief packages after the original application to the court in December 2004. According to court papers, that application was instituted to counter 'unfair discrimination' against artisanal fishers when they were not included in the Marine Living Resources Act.

Green Scorpions coming to Langebaan

A knock on the door by the Green Scorpions was probably the last thing the owners of a dozen Melkbosstrand seafront properties were expecting.

But they are all alleged to have infringed environmental regulations by illegally extending the footprint of their properties into the proclaimed public open space on the adjoining coastal dune, and to have caused some degree of ecological damage to the sensitive dune vegetation as a result.

While a few of these encroachments are just one or two metres, others involve big swathes of manicured lawn and substantial landscaped gardens extending 20m or more into the coastal dune. In some places, irrigation systems, wooden and stone pathways, and even a children's jungle gym and a trampoline were installed well beyond the properties' cadastral boundaries.

One resident has put up a "no entry" sign along an illegal wooden boardwalk leading through the dune between the beach and his house, while large amounts of lawn clippings, dead palm fronds and other garden refuse have been dumped into the dune vegetation.

On Thursday, a joint task team of the province's Green Scorpions - environmental management inspectors - and colleagues from the City of Cape Town's environmental resource management unit visited 12 sea-fronting properties in Harold Ashwell Boulevard, where alleged contraventions of the National Environmental Management Act (Nema) regulations had been identified from aerial photographs and other sources.

"Listed activities" in the coastal zone for which special environmental authorisation is required include construction or earth-moving activities within 100m of the high-water mark, and preventing the free movement of sand by planting vegetation and/or removing or damaging indigenous vegetation of more than 10m2, also within 100m of the sea.

Thursday's "ground truthing" inspection, after the initial identification of a possible transgression, was the second step in the legal process of having the affected areas restored to public open space, and rehabilitated.

Now the department will send the property owners "pre-directive" warning letters, pointing out the alleged offences and inviting them to respond.

Then, should any owner not respond appropriately to that warning, he or she will be issued with a formal compliance notice. And if that notice is ignored, the province can levy a fine as high as R5 million, team leader Achmad Bassier explained.

There were similar problems along the whole of the province's coastline, including at places like Paradise Beach in Langebaan and at Clifton, he said.

"Some residents are not aware that what they're doing requires authorisation, and so our visits are a bit of a surprise to them.

But as environmental inspectors we have a mandate, it's our work. And we do also create environmental awareness," he said.

The city's coastal management specialist, Mr Darryl Colenbrander, said it was important to address transgressions of this nature early.

"Actions that these residents have taken create a problem for us because it's an encroachment into public open space and can cause coastal erosion that ends up as a problem on the city's doorstep, so we need to address this now.

"And part of the problem is the incremental growth (into public space) that is quite hard to keep track of. That's why we need a handle on this."

While several of the 12 properties visited on Thursday were unoccupied or had visitors staying there, Bassier said he was satisfied that they had been able to make contact, and were prepared to send formal warning letters.

Dale Wakefield, one of the Green Scorpions, said one of the residents who had been at home had been very upset by the visit, and had insisted that the family had built their property 17 years ago, long before the Nema regulations had come into effect.

"I suspect we're going to be thrown this curved ball at every house. But the cadastral boundaries are defined, and they are encroaching into public open space," he said.

Source iol.co.za

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Trematon makes a move to buy Club Mykonos Langebaan

ALTHOUGH I'm (unfortunately) not a shareholder in the PSG Group, enormous value can be garnered just by glancing through this adventurous investment company's annual report.

Executive chairperson Jannie Mouton is always refreshingly candid about corporate matters, and you won't find the stuffy executive-speak that usually characterises an annual review.

I've always keenly anticipated PSG's annual report, ever since the company won my undying admiration for quoting my all-time favourite musician - the late, great Frank Zappa - in a previous annual report. But let's not go there right now (and no, the quote did not have anything to do with yellow snow).

What caught me eye this year was Mouton's admission that PSG might have made a mistake in unbundling its major stake in promising mass banking specialist Capitec in 2003.

He said the company believed it was the right decision at the time to unbundle Capitec – adding, rather intriguingly, that PSG was then a potential hostile takeover target. (Hmmm... would that have been Absa, perhaps?)

While most chairpersons would probably prefer not to highlight the painful past, Mouton reminded shareholders that "before then, we owned 58% in this great company as opposed to 34.9% today".

He did add, though, that PSG shareholders remain in a neutral position if they held onto their unbundled Capitec shares.

PSG, on the other hand, had to incur quite a cost – not to mention the dismantling of its original empowerment partner, Arch Equity - to rebuild a strategic stake in Capitec. So far, it's clearly been worth the effort.

Of course, one should perhaps look at another examples of letting go, where the company initiating the unbundling might really regret the decision in later years.

A classic example would be automotive components manufacturer Control Instruments, which split off vehicle tracking firm Mix Telematics about three years ago.

Mix looks a nifty little business (so much so that Imperial recently bought a strategic stake), and I suspect Control must have missed its steady annuity income when the global financial crisis smashed prospects in the automotive sector.

Life after Life?

More recently, there was the proposal by Cape-based empowerment group Brimstone (I'm purposefully ignoring Mvelaphanda, because it is intent dismantling its investment portfolio to realise underlying value) to sell off and unbundle the bulk of its stake in newly-listed private hospitals group Life Health.

Brimstone is set to retain only a small stake in Life, which, in view of Life's underwhelming listing, may seem a reasonable option at the moment. But could there be regrets over the longer term?

Of course, Brimstone (and they're a great bunch of operators) may well clinch such convincing future deal flow that shareholders are satisfied that there is indeed - as one shareholder at the recent annual general meeting (AGM) put it - "life after Life".

Another Cape-based investment group, Trematon, may well have come under question for recently selling off its strategic stake in listed property group Ingenuity - especially since the transaction took place at the bottom of the real estate cycle.

This week Trematon made a move to buy outright control of Club Mykonos Langebaan (which must have enormous long-term development potential), signalling to shareholders that the proceeds from the Ingenuity deal would not lie idle. But back to PSG. I think after the Capitec lesson the company will be playing for keeps.

Consequently, shareholders attending next week's AGMs for the various PSG groupings (Zeder and Paladin specifically) may be wasting their breath in pitching questions around the possibility of unbundling or separately listing promising and valuable investments like KWV Holdings, CapeVin and the much-mooted private schools business, Curro.

Of course, a more pertinent enquiry might be whether PSG - fresh from a R200m preference share issue - intends increasing its exposure to Capitec's fast-growing mass banking business.

- Fin24.com

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Saldanha Bay oil storage, one of the biggest in the world.

South Africa establishes new sources

The visit by South African President Jacob Zuma to Algeria a week ago gave a glimpse of an ongoing shift in the country’s oil relations with other countries. For the past decade or so, the focus has increasingly been to lessen dependency on traditional sources, while engaging new sources in Africa and elsewhere. Other considerations regarding the country’s fuel security have also come into play as oil in South Africa is fast becoming a whole new ball game.

Historically, South Africa has imported most of its crude oil from the Middle East, with a number of major multinationals such as BP, Shell, Caltex, and Total maintaining a dominant presence in the country.

Engen is another player that emerged as a domestic company when Mobil disinvested during the apartheid sanctions years. Engen has since been taken over by Malaysia’s national oil company, Petronas, with which the South African government has a close relationship.

Sasol developed into a major South African oil company in the 1960s, and in recent years into a global player. It supplies fuel-from-gas for the domestic market.

By 2001, Mossgas and Soekor were merged into state oil and gas company PetroSA in a rationalisation of the state's commercial interests in this sector. PetroSA is involved worldwide in oil and gas exploration, while both Sasol and PetroSA are involved in importing gas and producing liquid fuels from gas.

PetroSA, alongside the Strategic Fuel Fund Association, the Central Energy Fund, and the Petroleum Agency South Africa, all play various roles relating to oil procurement, storage, exploration, marketing and distribution. This includes managing the Saldanha Bay oil storage facility, one of the largest of its kind in the world, built in the apartheid era to counter sanctions.

Apart from exploration, PetroSA operates two offshore oil fields near Mossel Bay as well as various gas fields along the southern African coast. Multinational oil companies in South Africa also operate a well-developed refining and downstream oil industry. However, their refineries at Cape Town and Durban are ageing and becoming less competitive.

In recent years – because of geopolitical volatility in the Middle East – South Africa has worked toward reducing dependence on oil from Iran by increasing imports from Yemen, Qatar, Iraq, Kuwait, United Arab Emirates, Egypt and Saudi Arabia. At the same time, it has tried to lessen overall Middle Eastern imports and spread its sourcing increasingly to non-Middle Eastern countries.

Imports now come from African countries, South America, Russia and others.

This shift in focus has seen a number of significant oil deals being concluded recently. The first major, and controversial, was in September 2008 when President Hugo Chavez of Venezuela visited South Africa. The two countries agreed to co-operate in oil and gas exploration in Venezuela, refining Venezuelan oil at South Africa’s proposed new refinery at Coega in the Eastern Cape, investment by Venezuela’s state oil company in a local refinery and storage facilities, PetroSA sharing its gas-to-liquids technology with Venezuela, and more.

The announcement heralded another important step toward lessening South African reliance on oil from the Middle East. And there were distinct advantages for South Africa relating to the government’s concerns regarding security of oil supply as outlined in itsEnergy Security Master Plan for Liquid Fuels that had been released shortly before.

The South African government at the time also believed that Venezuelan oil processed by PetroSA for local consumption would help reduce domestic fuel prices.

In August 2009, during bilateral trade talks, South Africa and Angola signed a number of trade agreements, including co-operation in the oil sector. The oil agreement would allow Petro SA and Angola's Sonangol to work together in oil projects, said Angolan President Jose Eduardo dos Santos at the time.

The state-owned oil companies would work together in the areas of exploration, refining and distribution of oil, it was announced.

With Angola already challenging Nigeria as Africa's largest producer of crude oil, and having enormous hydroelectricity potential, energy was said to have been a key area of discussion. And Brazil and China, two countries with which South Africa has recently been enjoying beneficial and vastly increased trade relations, are already involved in the reconstruction of Angola, including its oil interests.

Shortly after the Angola agreement was signed, it was announced by the Industrial Development Corporation (IDC) in an economic report that South Africa’s trade with the world's four largest emerging markets - Brazil, Russia, India and China (BRIC countries) – had increased from $20.3 billion in 2001 to about $162bn in 2008. Among the bulk of these imports, excluding China, were crude oil and non-crude petroleum products.

During President Zuma’s visit to Algeria last week, he signed, among other things, a memorandum of understanding involving increased trade and co-operation between PetroSA and Algeria's Sonatrach.

PetroSA has been involved in oil production in Nigeria since 2004 and it was said some time ago that the company would be pursuing an interest in two oil blocks in the Democratic Republic of Congo (DRC).

In April, President of the Republic of Congo (Congo-Brazzaville) Denis Sassou-Nguesso announced in Pretoria that the South African company would be given oil production rights in his country.

Equatorial Guinea is another African country with which South Africa has in recent years been stepping up its trade relations, believed to also involve oil.

In addition, PetroSA and Sasol are already importing gas, mainly with a view to boosting the local gas-to-liquid fuel production. These imports will assist to extend the life of PetroSA’s gas-to-liquid refinery at Mossel Bay.

Apart from that, PetroSA has focused its natural gas exploration activities in southern Africa, and exploring for oil in Egypt, Sudan and Equatorial Guinea.

Sasol Synfuels and Qatar Petroleum (QP) signed an agreement to jointly construct an $800-million gas-to-liquids plant.

A development that is symptomatic of the changes taking place in South Africa’s oil supplies is the fact that, after years of secrecy, overriding political and security considerations and protected monopolist practices, the fuel industry in South Africa is heading for a new showdown as competing players variously promote and resist new options in a changed global and local environment.

While state-owned PetroSA wants the government to invest billions of taxpayers’ rands in a new 400 000 barrels-per-day refinery at Coega, known as the Mthombo Project, one of the largest petroleum groups active in South Africa, BP Africa, is cautioning the government against approving the refinery project of more than R77bn.

In fact, BP chief economist Christof Rëhl recently visited South Africa to promote BP’s argument that the proposed refinery would cost a great deal of money for relatively little employment and would not improve anything.

BP also argues that the costs are likely to be much more than envisaged, and that there is a surplus refinery capacity worldwide at present which is likely to be the case beyond 2020.

A new refinery now would be an unfair burden for taxpayers, the company argues, and calls for a comprehensive review of all supply-side options that could have far-reaching implications for the industry. It maintains that the surplus capacity is such that a new refinery would hardly improve South African fuel security.

But the government has so far rejected objections from oil companies such as BP. Last month, Energy Minister Dipuo Peters said the project was key to providing a solution to domestic liquid fuel challenges. According to her, it would address the gap between demand and supply, further reduce the dependence on imported finished product, and promote new standards for clean fuels.

PetroSA has also maintained that building the Coega refinery is the most sustainable solution for meeting the country's need for supply-side security and improved fuel quality. Of course, PetroSA is also concerned about the fact that it has already spent more than R250m on the project, with a further pending investment of R2.4bn to complete the front-end engineering design of the project.

On the other hand, it is widely suspected in industry circles that BP and the other large oil companies operating in South Africa have every reason to resist the competition from a new player which could cut heavily into their super profits, particularly as their conventional refineries are ageing, uncompetitive and not living up to the latest emissions standards.

Mthombo, some say, could threaten the very existence of the oil multinationals in South Africa.

On the local oil exploration front, after years of showing no interest it, it seems Petro SA’s activities, along with new foreign partners, may have prompted the oil giants into action. It has just been announced that Shell hopes to explore for oil and natural gas over an extensive area of South Africa's West Coast. With seawater depth in the proposed region ranging from 150m to about 4 000m, this is likely to be the deepest that Shell has ever prospected for oil.

Indeed, when it comes to South Africa’s oil interests, the times they are a changing.

Source leadershiponline.co.za

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