The oil industry is divided into upstream and downstream activities. Upstream refers to the exploration and production of crude oil. Downstream refers to the refining, transportation and marketing of end-user products. South Africa has no crude oil reserves of its own and about 60% of its crude oil requirements are met by imports from the Middle East and Africa (Source: South Africa Yearbook 2012/2013).
The major petroleum products that are sold in South Africa are petrol, diesel, jet fuel, illuminating paraffin, fuel oil, bitumen and liquefied petroleum gas (LPG). Petrol and diesel are the major liquid fuels that are used in South Africa.
Government regulates wholesale margins and controls the retail price of petrol. South African petroleum prices are regulated, based on import parity price formulas. This means that the domestic price is influenced by supply and demand for petroleum products in international markets, combined with the rand/dollar exchange rate.
Map showing location of refineries in South Africa
Refined petroleum products are produced by the following methods:
- crude oil refining;
- coal-to-liquid fuels and gas-to-liquid fuels (Sasol); and
- natural gas to liquid fuels (PetroSA).
There are six refineries in the country - four on the coast and two inland.
Demand and supply
Crude oil is refined at South Africa’s four crude oil refineries. The table below shows the development of South Africa’s refining capacity (barrels per day) from 1994 to 2014.
Petroleum products are moved from refineries by pipelines, rail, sea and road to approximately 200 depots, 4 600 service stations and 100 000 direct consumers who are mostly farmers.
Detailed statistical analysis of the industry is available in the SAPIA Annual Reports.
BP Southern Africa, Chevron South Africa, Engen Petroleum, PetroSA, Sasol Oil, Shell South Africa and Total South Africa are the main players in the South African oil industry. They operate storage terminals and distribution facilities throughout the country. Until recently, there were very few non-refining wholesalers supplying petrol and diesel in South Africa. Today, there are a number that are registered with the Department of Energy (DOE).
There are approximately 4 600 service stations (forecourts - company owned and dealer owned) in South Africa. The petroleum industry was licensed for the first time in 2005, in terms of the Petroleum Products Amendment Act, 2003. Government limits the number of licences allocated. Manufacturers and wholesalers are prohibited from holding a retail licence except for training purposes. SAPIA members are therefore restricted to a limited number of retail licences. SAPIA members do have the option to franchise a service station to an independent dealer and directly supply it with petroleum products. There are also stations that are independently operated and unbranded.
Industry role players
The major role players in the South African liquid fuels market are government and its associated institutions, as well as SAPIA members. The DOE is responsible for ensuring the secure and sustainable provision of energy for socio-economic development. Through institutions like the CEF and NERSA, the government plays a significant role in the South African liquid fuels market.