South Africa’s oil demand is running at an estimated 525,000 bpd. In recent years, domestic consumption has been falling. Last year, however, strong economic growth led to a reversal of this pattern. Demand for light products rose by almost 7% compared with 2006, according to provisional data on domestic product sales in the first nine months of 2007.

Demand for diesel, however, appears to have risen by almost 12%. Consumption in 2007 appears to have been in the region of 170,000 bpd. Domestic refinery production, on the other hand, has been running at about 150,000 bpd, leading to a deficit that has to be covered by imports.

Gasoline also appears to be heading into deficit, with imports also reported during 2007. Small volumes of kerosine were also sourced from abroad. Both products are expected to be imported on a regular basis by about 2009 or 2010.

South Africa’s refinery problems are not the result of a shortage of crude distillation capacity. The country’s conventional refineries have a combined distillation capacity of 515,000 bpd. Alongside these are two plants producing liquids from coal and gas, respectively, giving the country a total capacity of 725,000 bpd.

The refiners’ problem lies instead with a shortage of upgrading capacity. The problem is particularly acute for low sulphur middle distillate production. In January 2006, the government reduced the level of sulphur in diesel from 0.30% to 0.05%. Since then, refineries have struggled to produce diesel to the required specification in the volumes needed by the domestic market. Widespread shortages were reported around the time of the changeover and nearly 15,000 bpd of diesel had to be imported in 2006 as a whole. This year imports could be as high as 25,000 bpd.

The specification for motor spirit was also changed at the same time, with the elimination of lead from the gasoline pool. As with diesel, shortages occurred at the end of 2005 and in early 2006, necessitating some spot purchases from foreign refiners. More imports are likely this year.

Imports could be boosted in future by further changes in product specifications. The government has already proposed to reduce still further the sulphur content of diesel. Low sulphur diesel is mainly imported from India. Diesel imports are forecast to reach 70,000 bpd by 2012. By then, gasoline import could exceed 50,000 bpd.