A new report released on Monday warns that South Africa's outdated refineries need urgent updating to meet clean fuel requirements, but in may be cheaper to import fuel.

The report on the impact of the petroleum industry on the country's economy was commissioned by the South African Petroleum Industry Association (Sapia) and undertaken by KPMG.

South Africa has over the years fallen behind the internationally accepted standards for the quality of fuel and according to the report it will cost about $3.8bn (R53bn) to upgrade all the local refineries to meet the cleaner fuel standards, says a report on Cape Business News.

The last technical adaptation for the mandatory phasing out and reduction of the lead and sulphur content in fuels cost the consumer billions of rand.

According to the KPMG report the upgrading of the country's refineries to meet current international standards will cost the consumer billions of rand.

In South Africa the consumer pays for virtually all the costs of the oil industry for the importing and refining of crude oil, but the industry's profit margins are guaranteed by the government's fixed formula.

The country already imports around 25% of its petrol and diesel requirements despite generous regulations that are specifically designed to ensure investment in oil refineries.

The oil industry has in fact reached an impasse with the government on the investments needed to produce cleaner fuels.

The report makes the conclusion that it will financially make more sense to import petrol and diesel “which should generally be welcomed and supported because it should not be allowed that the capital and costs for the upgrading of the refineries must come from the consumer."

Read full story on Cape Business News HERE