Chemical Technology May 2015

Comment

A strategy for getting past the crossroad

by Carl Schonborn, PrEng, consulting editor, ‘Chemical Technology’

T he petrochemical industry and, by impli- cation, the chemical and construction industries, seem to be at an impassable crossroad. The oil industry took one look at the oil price and decided this was tantamount to a catastrophe; meanwhile, oil refiners have racked up enormous profits in the first quarter of this year thanks to better refining margins. One hopes this will urge more spend where it is needed most, in clean fuels and emission controls. Maintenance of refiner- ies is an ongoing practice and is a budget that cannot be tampered with too much. However it is the large Capex projects such as clean fuels and expansions that are the lifeblood of the petrochemical contractors. The spin-off is enormous; all the other disciplines and those working in them, apart from process engineers, are dragged in to the loop, includ- ing environmental experts, civil engineers, geotechnical engineers, mechanical engineers, piping designers, construction engineers, elec- trical and instrumentation engineers, as well as a host of related suppliers to these disciplines. Unfortunately, on the other side of the crossroad is a number of almost seemingly in- surmountable problems, including a shortage of power, a labour force that is locked into the inflation spiral and looks to annual increases to maintain some semblance of a lifestyle, and additionally, a weak rand, which makes the imported cost of much-needed infrastructural equipment almost prohibitive. What can possibly ease the transition across the crossroad? Government. Govern- ment is the only agent that can kickstart the industry, notwithstanding some of the legacy

issues that stand in its way. For example, the enormous capital costs of the two coal-fired power stations which are not only way behind their original schedules, but are consuming enormous amounts of money just to bring about a final completion/commissioning date. Gas should have been part of the equation a long time ago, but is presently a long way off as South Africa just does not have the infrastruc- ture to distribute gas, whether it be in the form of stranded gas in our neighbouring countries, offshore gas fields, shale gas in our southern provinces or Liquid Natural Gas, which is becoming a worldwide traded commodity, but needs significant infrastructure in the form of ports, regasification terminals and pipelines. At the end of last year, the most welcomed decrease in the price of petrol and diesel would have been an ideal opportunity to start up the clean fuels refining strategy in South Africa, with probably a fairly modest tariff on the then fixed selling price. However, the fiscus spotted this windfall and it did not take long for a hefty tariff increase to appear, to be converted to Tax Revenue income for the Revenue Service. It is imperative that the refiners start their clean fuels expenditure as soon as possible in order to reach the Euro V emission standards. Motor vehicles are being designed to operate on these fuel specifications, but if we wait too long, the cost of manufacturing a vehicle to operate on the current refined specifications will be prohibitive. Gas is the energy of the future; clean fuels are now a necessity, not a luxury. Let the Strategy begin.

Published monthly by: Crown Publications cc Crown House Cnr Theunis and Sovereign Streets Bedford Gardens 2007 PO Box 140 Bedfordview 2008 Tel: (011) 622-4770 Fax: (011) 615-6108 E-mail: chemtech@crown.co.za Website: www.crown.co.za Consulting editor: Carl Schornborn, PrEng Editor: Glynnis Koch BAHons, DipLibSci (Unisa), DipBal (UCT) Advertising: Brenda Karathanasis Design & layout: Anoonashe Shumba BTech Hons Creative Art (CUT-Zim)

Circulation: Karen Smith Publisher: Karen Grant Director:

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Chemical Technology • May 2015