* S.Africa releases draft fuel specifications
* Wants less benzene and sulphur in fuels
* Sees new fuels available by 2013
CAPE TOWN, March 8 (Reuters) - Crude oil refineries in South Africa have until 2017 to upgrade their plants, the country's energy minister said on Tuesday on releasing new draft fuel specifications in Africa's largest economy.
South Africa wants less cancer-causing benzene and sulphur in its fuels as it seeks to reduce the health and climate impact of dirtier fuels within two years, Energy Minister Dipuo Peters said. "We are (now) reducing the allowable levels of benzene, which is a known carcinogen, from 5 percent to 1 percent," Peters said.
Besides public health concerns, South Africa, a net importer of fuels and the continent's worst polluter, also wanted to reduce its greenhouse emissions.
"We are therefore reducing the level of sulphur in our fuel 500 parts per million to 10 parts per million," Peters said.
The low levels of sulphur would allow for the introduction of engines that spew less carbon dioxide emissions, complementing a carbon tax introduced by Finance Minister Pravin Gordhan and likely to hit company profits and consumers.
South Africa wants to further clean up its liquid fuels industry after previously prohibiting the addition of lead into all grades of petrol and reducing sulphur in diesel.
Four crude oil refineries, operated by Shell and BP among others, need to invest up to $4 billion on a cleaner fuels upgrade, but have demurred over uncertainty regarding the cost of reconfiguring refineries.
The South African Petroleum Industry Association, which represents major oil companies, has been in talks with the government on the rollout of new Euro 4 or Euro 5 fuel specifications but has said it wants a cost-recovery mechanism before investing in upgrades.
"There are approaches that can be considered including differentiated taxes, which create an advantage for high-quality fuel," Peters said on Tuesday.
She said turmoil in North Africa and the Middle East, which have pushed oil prices to new highs, demonstrated the need for South Africans to change their driving habits to use fuel more efficiently.
The country is expected to have to import 180,000 barrels per day of fuels by 2020 if it does not invest in a proposed $10 billion 400,000 bpd new refinery at Coega.
(Reporting by Wendell Roelf, editing by Jane Baird)