Even at $70 per barrel, Engen's refining margins are being squeezed. If oil prices increase, margins will be squeezed further

Engen's largest oil refinery plant, which lies south of Durban, could stop refining crude oil in the next few years, unless majority shareholder Petronas comes to the party with an investment in the region of R20bn.

The plant's general manager, Willem Oosthuizen, said this is one of three possible options presented to shareholders - it's now up to them and a decision will have to be taken by the end of next year.

After Sapref (refining about 165 000 barrels of crude oil a day), Engen is the second largest refinery in the country (120 000 barrels per day).

But it's also the oldest refinery in SA and this is a large part of the problem.

SHOOT: Quite a few insights here. Maintenance costs, refining margins, higher oil prices. The Durban facility is 55 years old, but do you think anyone can come up with R20 billion for an upgrade? In the current climate?

clipped from www.fin24.com Generally, a high oil price like the current one of more than $70 per barrel, squeezes the refining margin. If there are production problems at the other end of the refining process the margin goes negative, by as much as $2 per barrel. Apart from the social effect if the plant stops refining crude oil, it could also further threaten fuel supply in the country. With more than 20% of the market,Engen is the largest petrol retailer in South Africa. "Right now our refining margins are so low we're running on a break-even basis. We've tabled the three options before shareholders. It's now up to them,: Oosthuizen said.