Sapia director Colin McClelland has urged government to introduce a clean fuels levy to help fund the multi-billion rand investment needed to meet stricter fuel requirements.

Sapia (South African Petroleum Industry Association) director Colin McClelland has urged government to introduce a clean fuels levy to help fund the multi-billion rand investment the industry needs to make to meet stricter fuel requirements.


Sapia represents the country's major producers, refiners and retailers of liquid petroleum products. Its members include synthetic fuels and chemicals producer Sasol , state-owned PetroSA, Engen, and global oil majors BP, Caltex, Shell and Total.


In Sapia's 2003 Annual Report, McClelland said that South Africa's energy industry needed to make large capital investments, totaling between R10 billion and R15 billion, to meet the stricter specifications for the reformulation of petrol and diesel that will be mandatory by January 2006.


"It is estimated that the complete removal of lead compounds from petrol, and the reduction of the sulphur content in diesel from the current maximum of 3 000 parts per million (ppm) to 500 ppm, will cost the refining industry between 10 billion rand and 15 billion rand to undertake," he was quoted as saying.


The only part of these costs that could be recovered from the consumer was the higher cost in international markets of 500 ppm sulphur diesel versus the 3 000 ppm grade, which currently amounted to between 6 cents and 10 cents per litre, he added. All other capital and operational costs would have to be absorbed by the oil companies if they intended to stay in the business.


McClelland said countries such as Germany and Australia provided tax incentives to producers of clean fuels.


"In line with these practices, Sapia calls on the government to consider the application of a clean fuels levy locally. The purpose of such a levy would be to assist refineries in recouping a portion of their multibillion-rand investments needed to modify their refinery processes in order to meet the more environmentally friendly petrol and diesel specifications that will become mandatory in 2006.


"Discussions with the government, most notably the Departments of Finance and Minerals and Energy, have been initiated and it is hoped that finality on this matter can be achieved in the not too distant future," McClelland added.

Original article from Car