Saudi Arabia in talks to build refinery, petrochemicals plant in South Africa

Saudi Arabia’s Energy Minister Khalid Al-Falih speaks during a news conference in Riyadh, Saudi Arabia January 9, 2019. (File Photo/Reuters)
Updated 18 January 2019

Saudi Arabia in talks to build refinery, petrochemicals plant in South Africa

  • Saudi Arabia is in talks to build an oil refinery and a petrochemicals plant in South Africa as part of $10 billion of investments in the country
  • Saudi oil would be used in the planned refinery whose construction would be led by Saudi Aramco

PRETORIA: Saudi Arabia plans to build an oil refinery and petrochemicals plant in South Africa as part of $10 billion of investments in the country, Saudi Energy Minister Khalid Al-Falih said on Friday after talks with his South African counterpart.
The announcement is a much-needed vote of confidence in Africa’s most industrialized economy, where President Cyril Ramaphosa is trying to attract $100 billion of new investments to rekindle growth.
The new refinery would reduce the need for refined product imports and cement Saudi Arabia’s dominant position in South Africa’s oil sector. The Kingdom already supplies 40 percent of the crude oil consumed in South Africa.
“Saudi Aramco and South Africa’s Central Energy Fund are moving forward with the feasibility study and identifying the parameters of the project,” Falih told reporters in Pretoria, South Africa’s administrative capital.
South African Energy Minister Jeff Radebe said a location for the refinery and petrochemicals plant would be finalized in the coming weeks. The capacity for the refinery is yet to be determined.
South Africa has talked about building an extra refinery for a decade, but it has struggled to agree commercial terms with investors.
It has six refineries, four using crude oil and two synthetic fuel as feedstock. Royal Dutch Shell, BP , Total and Sasol are among major refinery operators.
Al-Falih said Saudi Arabia had held discussions with Ramaphosa’s predecessor, Jacob Zuma, about building a refinery in South Africa but the proposed location was not attractive.
The two governments are now considering Richard’s Bay in KwaZulu-Natal province, home to South Africa’s major coal export terminal, among potential locations for the refinery.
State oil giant Saudi Aramco is also studying whether to use South African oil storage facilities in Saldanha Bay, while Saudi power firm Acwa Power is looking at investing in South Africa’s revamped renewable energy program.
Al-Falih confirmed there were discussions about the kingdom investing in South African state defense company Denel, as exclusively reported by Reuters in November.


Japan lower house passes US trade deal but auto tariffs still in limbo

Updated 19 November 2019

Japan lower house passes US trade deal but auto tariffs still in limbo

  • There is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts
  • Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years

TOKYO: Japan’s lower house of parliament approved on Tuesday a limited trade deal Prime Minister Shinzo Abe agreed with the United States, clearing the way for tariff cuts next year on items including US farm goods and Japanese machine tools.
But there is uncertainty over how much progress Japan can make in negotiating the elimination of US tariffs on its cars and car parts, casting doubt on Abe’s assurances the deal he signed with US President Donald Trump was “win-win.”
Japan and the United States last month formally signed the limited trade deal to cut tariffs on US farm goods, Japanese machine tools and other products while staving off the threat of higher US car duties.
The government’s proposal to ratify the trade deal will next be brought to the upper house for a vote but its passage in the powerful lower house increases the chances it will come into force in January.
The deal will give Trump a success he can trumpet to voters but Abe has said it will bring as much benefit to Japan as to the United States.
Japan has estimated the initial deal will boost its economy by about 0.8 percent over the next 10-20 years, when the benefits fully kick in. It also estimated ¥212.8 billion of overall tariffs on Japan’s exports to the United States will be reduced.
But the figures were based on the assumption the United States would eliminate its tariffs on Japanese autos and auto parts — a major sticking point.
Without those tariff cuts, the reduction in overall US tariffs on Japanese goods would be a little over 10 percent of the government’s projection, according to an estimate by Japan’s Asahi newspaper and Mitsubishi UFJ Research and Consulting.
After the deal is ratified, Japan and the United States have four months to consult on further talks, and Trump has said he wants more trade talks with Japan after the initial deal.
But Japanese government sources familiar with the talks say the momentum to negotiate a deeper deal appears to have waned for now with Washington preoccupied with talks with Beijing.
“It’s unclear whether Washington seriously wants to continue trade talks,” one of the sources said.
“The question is how much time the United States can allocate for talks with Japan, even if we start negotiations. There’s limited time to conclude talks before the presidential elections.”
Japan and the United States already appear to have different interpretations of what was agreed on car tariffs.
Japan has said it has received US assurance that it would scrap tariffs on Japanese cars and car parts, and that the only remaining issue was the timing.
But Washington has not confirmed that.
US Trade Representative Robert Lighthizer has said cars were not included in the agreement, and that it was only Japan’s ambition to discuss car tariffs in the future.
A US document only said customs duties on autos and auto parts “will be subject to further negotiations with respect to the elimination of customs duties.”
“The deal was left vague on the issue of tariff cuts on Japanese auto and auto parts. Otherwise, we couldn’t have reached the agreement,” another source said.
There is also uncertainty on whether Trump will drop threats to impose steep tariffs on Japanese car imports under “Section 232” that gives him authority to do so on national security grounds.
Abe said he had got an assurance from Trump that he would not do that, though analysts say the president could always change his mind, or at least keep Japan guessing.
Opposition parties have attacked Abe for a deal they say is unfair. Critics say Trump could drag his feet on further negotiations unless he is sure he can win more concessions.
“There’s a chance Trump will put pressure on Japan on trade to appeal to his voters,” said Junichi Sugawara, senior research officer at Mizuho Research Institute. “There’s a possibility he could renew his threat over auto tariffs.”