SA, China Move Closer to Refinery Deal

South African state oil company PetroSA and China's Sinopec Group took another step towards creating Africa's largest oil refinery after the two firms signed an agreement in Pretoria on Tuesday.

The US$10-billion Mthombo refinery project is planned for the Coega Industrial Development Zone outside Port Elizabeth in the Eastern Cape.

The agreement, signed during a meeting between President Jacob Zuma and Chinese President Xi Jinping in Pretoria on Tuesday, will create opportunities for oil and gas exploration.

Jinping is in South Africa for the 5th BRICS (Brazil, Russia, India, China and South Africa) summit, which got under way in Durban on Tuesday.

"The framework agreement enables the two companies to move forward this global-scale crude oil refinery project," the two chairmen, PetroSA's Benny Mokaba and Sinopec's Fu Chengyu, said in a statement.

According to Business Day, the refinery would pump approximately 360?000 barrels per day, while creating 27?500 direct and indirect jobs during construction and 18?000 jobs when it started operating.

The agreement follows the signing of a study agreement between the two companies in May last year.

Mokaba described the agreement as an important building block in bringing the project to fruition.

"[It] gives PetroSA the opportunity to extend a mutually beneficial relationship with a major national oil company," he said. "This strategic relationship can and will be leveraged to benefit PetroSA's sustainability and growth programmes."

As part of their growth plans, the companies agreed to include the Industrial Development Corporation (IDC) in the next phase of the project's development.

Downstream opportunities in southern Africa will also be explored, as will the development of storage and logistical infrastructure.

"South Africa is politically stable and economically developed," Fu said. "Sinopec pays close attention to its business growth in South Africa, and wishes to contribute to local economic and social development."