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Project Mthombo costs reduces from $11bn to $9bn

PetroSA expects the capital expenditure costs of its planned Coega refinery to fall by about 25% because of the unfavourable global economic conditions, said CE Sipho Mkhize. Delays or cancellations of other major projects around the world enabled PetroSA to negotiate favourable terms as the market had swung from a supplier's market to a buyer's market. Speaking at a Energy Conference in Johannesburg on 11 February 2009, Mkhize said the 400 000 barrel per day project was"perfectly timed".

He said PetroSA started pursuing the project when there was a peak in construction costs and those costs were slipping back. He said if PetroSA initiated negotiations with suppliers in the next 18-24 months, the company would be in a position to negotiate "the most competitive terms".

Mkhize said the global economic slowdown and the subsequent freezing of major projects around the world would free up crucial skills, into whichPetroSA would tap.

PetroSA vice-president for new ventures midstream, Joern Falbe, said the costs of building the refinery could fall by about $2bn, from the initially forecast $llbn to about $9bn. "That is a significant improvement in this tight capital funding environment." He said during the pre-feasibility phase of the project, when the $llbn was forecast, that prices of inputs such as steel were at a peak.

Source: Business Day 12 Feb 2009

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