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Coega gets the nod for major energy, oil and gas refinery projects

OCTOBER 30, 2015
Coega gets the nod for major energy, oil and gas refinery projects

The Coega Development Corporation (CDC) Industrial Development Zone (IDZ) has received a major endorsement as the ideal location for oil refinery and energy related projects.

“Setting up refining capacity in the Coega SEZ is an important development for the liquid fuels sector growth and development. This will boost industrialization, job creation and attract significant foreign direct investment” - ANC NGC resolution.

CDC Head of Marketing and Communications, Dr Ayanda Vilakazi, said the establishment of refining capacity in Coega would be important for the growth and development of the liquid fuels sector.

“Such capacity will boost industrialisation and job creation, and attract significant foreign direct investment,” he said.

“Coega is ideally placed to serve markets at home and abroad. It has the necessary enabling environment, and infrastructure is already in place. The IDZ is also served by two ports, Port of Port Elizabeth and the deep water Port of Ngqura in Zone 1 of the Coega IDZ.

“Building projects such as the Oil Refinery at Coega would relieve congestion in the Durban facilities. It would become the second pipeline to Gauteng and reduce supply line risk.”

The CDC says that South African companies, including state-owned companies, should have a clear role in the gas industry. Projects such as Operation Phakisa would advance offshore oil and gas exploration and should be implemented without much delay. In addition, onshore exploration for shale gas should be accelerated so that no damage is done to South Africa’s water and environmental resources.

Specific to the proposed Coega Oil Refinery, called Project Mthombo, entails the construction of a new crude oil refinery based in the Coega IDZ. The following are some of the key noticeable features of the project:

  • The plant has been specified to process 300,000 barrels of crude oil per day.
  • The refinery will produce diesel, petrol and jet fuel.
  • Strategically located in the Coega IDZ, it will be at the heart of trade flows and meet a growing demand for petroleum products.
  • Economic Factors for consideration:

-        $10 b to be spent during construction;

-        R94,6b  per annum operational costs (including feedstock);

-        83% of economic impact will accrue to the Eastern Cape;

-        Household income in the Eastern Cape could rise R1.8b per annum;

-        5.5% p.a possible economic growth for the Eastern Cape Province.

-        Spin-offs from the localisation initiative amounting to about R20bn could come to the province.

-        Job creation:

Construction phase: Up to 23,000 at peak; 5,000 to 10,000 highly skilled artisans.

Operation phase: Approx. 1,000 permanent refinery jobs; 11,000 indirect jobs; and training facility planned

The following Oil Refinery production flow chart and products:

Feasibility:  Completion June 2016

Construction: Duration 3-4 years

Planned start of operations 2022

“The Oil Refinery will contribute to the secure supply of liquid fuels. Feasibility studies have been completed and construction is estimated to take between three to four years. It is envisaged that the project will start operations in 2022, though an earlier date for the implementation of the project would be ideal,” Vilakazi said.

“In addition, fuel production capacity cannot meet demand. Refineries have been upgraded as far as is practical and by 2018 South Africa may have to import 20% of its fuel to meet consumption demand.”

“The employment generation potential of the Oil Refinery projects aligns with the economic development intentions of the state.”

The project is also strongly aligned to the Eastern Cape’s provincial industrial development strategy. The Coega IDZ plays a pivotal role as a provincial asset, together with the Port of Ngqura, which is the trans-shipment hub for sub-Saharan Africa.

“The oil refinery presents significant up- and down-stream opportunities to contribute substantially to economic growth in both urban and rural areas through the development of a petrochemicals cluster. The development offers opportunities in: industrial diversification; agriculture, agro-processing and rural development; sustainable job creation, and purchasing impact and supplier development.

“It is anticipated that about 1 000 permanent refinery jobs and about 11 000 indirect jobs would be created on the project. The spin-offs from the localisation initiative could amount to R20-billion that could come to the Eastern Cape Province.

“We estimate that household income in the Eastern Cape could rise to R1.8-billion per annum, and there could be a 5.5% per annum economic growth for the province.”

Vilakazi added that the shortage of electricity supply was a strain on the economic growth and development of South Africa, and that the Department of Energy had identified the Oil refinery as a priority.  

“The Coega IDZ is one of the most advanced in terms of preparations for gas to power projects and the ideal location for projects like the LNG berth and mega project Dedisa Peaking Power Plant, which has started with the commissioning phase.” The construction on the R3.5bn Dedisa plant has been on track for completion before the end of 2015. The 24-month successful completion within budget, scope, and timeframes is a significant milestone for such a mega project.    

Vilakazi noted further that, since 2006, the CDC has undertaken at least five environmental impact assessment studies supporting the gas-to-power solution.

“The EIA studies were concluded for rezoning of land in the IDZ, including the establishment of a 400kV transmission line between the plant site and the Dedisa substation, and the marine pipeline servitude, which is currently underway.”

A draft scoping report was also prepared by Eskom and CeF/iGas for a LNG-to-power project. Transnet’s port development plans include the liquefied natural gas (LNG) terminal in the Port of Ngqura, and several berth options have been identified for its deep-water seaport adjacent to the Coega IDZ.

Why Coega?

Coega boasts a special world-class suite of incentives – available to both current and future investors in the Coega Industrial Development Zone (IDZ) – and is driving investment growth and supporting existing investors. Unlocked by the new Special Economic Zone (SEZ) policy promulgated last year, the long-awaited suites of incentives are primed to make SEZs more attractive to both domestic and foreign investment.

The Coega IDZ hosts world class infrastructure through its 14-cluster zone model. It has land available to host key gas to power projects, with spin offs for various other sectors. The CDC has approved the Coega Infrastructure Master Plan –a defined services corridor from project site to Dedisa Substation with good access to site via the N2 national road and the ancillary road network.

In terms of the newly announced SEZ incentives, the Coega IDZ will be able to offer qualifying investors a corporate tax rate of 15% Corporate Income Tax and in the customs controlled areas Value Added Tax and customs duty suspension. The Coega IDZ also offers cluster investors the possibility of accessing a suite of government incentives that maximise benefits and facilitate supply chain integration. These include, but are not limited to, one-time and/or recurring incentives as discussed below:

o        Special Economic Zones – SEZ Proposed Benefits



Reduced corporate tax


Building allowance

10% per annum


Duty Free Zone

Employment Tax Allowance

Employees earning up to R6 000

Other Applicable benefits

May be announced from time to time


Customised solutions for investors include serviced sites and a ‘plug and play’ approach that offers:

  • Facilities for skills development (with personnel to provide customised solutions).
  • Custom-controlled areas.
  • Environmental assistance (where applicable).
  • Marketing.
  • An ICT services base infrastructure, which allows for the connectivity of voice/data/internet and video services up to the boundary of the tenants’ premises, and

Support with safety, health, environment and quality services.

Image: IDEAL BUSINESS HUB: The construction of the Dedisa Peaking Power Plant located in the Coega Industrial Development Zone in Port Elizabeth is on tract and has gone to commissioning phase. The Coega Development Corporation IDZ is ideally located for major projects such as energy, oil and gas.