CAPE TOWN, Feb 20 (Reuters) - South Africa plans to invest 2 billion rand ($258.5 million) to build an ethanol plant and help a nascent biofuels sector that could reduce the country’s reliance on imported fuel, an industry player said on Monday.
Africa’s biggest economy imports about 60 percent of its crude oil needs and became a net importer of finished petroleum products several years ago.
In recent months, South Africa has been hit by fuel shortages due to planned and unplanned shutdowns at four of its six refineries.
Roak Crew, chief executive at Sugar Beet RSA, which is implementing the project in collaboration with the government, said the plant could start operating in 2014. It would initially produce some 90 million litres of fuel a year as sugar beet and grain sorghum are converted into ethanol.
Output at the plant to be located in the impoverished Eastern Cape province could eventually be raised to 200 million litres a year, he said, but concerns among refiners regarding fuel blending and feedstock could hamper development.
“At the moment there is no requirement by the fossil fuel producers to blend biofuels into their products, and without this happening, the industry will not be sustainable,” Crew told Reuters.
The plant would provide a major boost to the development of South Africa’s biofuels industry, which has been held back by an inadequate regulatory regime and concerns that biofuels would hurt food security and impact food prices.
The plant would be funded by the government, which has a target of having biofuels annually contribute 2 percent, around 400 million litres, to liquid fuels consumption by 2013.
Agriculture Minister Tina Joemat-Pettersson said the state wanted to ensure small-scale farmers are involved in sugar beet planting to boost farming in areas neglected during apartheid.
The construction of the plant is likely to start later this year, she said, adding that exports into Africa were an option.
“We have already done the pilot, so this now is beyond the pilot stage. We are quite confident that this is going to be a successful project,” she said recently.
Canola, sunflower and soya are feedstock for biodiesel, while sugar cane and sugar beet are feedstock for ethanol.
South Africa’s Illovo Sugar, a unit of Associated British Foods said it may opt to invest in biofuels from sugarcane if it made business sense.
The South African Petroleum Industry Association (SAPIA), which represents refiners including Royal Dutch Shell, BP, Chevron, Total and Sasol said the government needs to ensure that the push for biofuels does not compromise the availability of fuel supplies.
“The regulated pricing mechanism needs to be determined. What guarantees can be given that sufficient stocks of biofuels will be made available to provide for the mandatory blend requirements?” said head of SAPIA Avhapfani Tshifularo.
South Africa’s Department of Energy plans to finalise the mandatory blending regulations by the end of this year. (Reporting by Wendell Roelf; editing by Jason Neely)