State-owned gas-to-liquid fuel company PetroSA projects a loss of R2.2bn in the year to end-March 2017, including R1.1bn in an additional impairment, PetroSA acting CEO Bhekabantu Ngubane said in Parliament on Tuesday.
The forecast loss comes on the back of the R14.6bn net operating loss in the 2014-15 financial year. This included an impairment charge of R14.5bn for the offshore Ikhwezi project, which failed to deliver the volume of gas reserves anticipated. Inadequate project management contributed to the loss on the project.
Adding to the company’s fiscal challenges is the R8.8bn shortfall in its decommis-sioning liability.
PetroSA board members told members of Parliament’s energy committee they were satisfied that the matter had been dealt with “as any responsible organisation would do”.
No pre-planned negligence was found, board members told MPs. Every attempt had been made to hold executives to account but it was difficult to find charges that would stick against the former CEO and former chief financial officer.
MPs were shocked that retention bonuses were paid to senior managers and top professionals even when the company was bleeding because their contracts of employment were not linked to performance but to their remaining in their jobs.
“Current projections indicate that PetroSA will continue to be financially challenged throughout the planning period of 2017-18 to 2020-21 unless drastic interventions are initiated,” members of the committee were told in a presentation on PetroSA’s turnaround plans.
The company is in a phase of voluntary retrenchment.
Among the threats to its future sustainability was its limited access to affordable feedstock due to the depletion of its offshore reserves. Leadership instability was also a challenge.
Ngubane told MPs that PetroSA had made “significant” progress in converting its gas to liquid refinery in Mossel Bay for liquid feedstock.
It was in negotiations with its sister company, the Strategic Fuel Fund, for it to make a bigger storage tank available so it could import larger volumes of feedstock. Ordering 1-million barrels instead of 300,000 barrels would save $1m per ship.
Energy Minister Tina Joemat-Pettersson said the structural problems of the Central Energy Fund — the parent company of PetroSA,
the Strategic Fuel Fund and three other subsidiaries — were being addressed.
The problem was that the Central Energy Fund did not have the same powers over its subsidiaries as other holding companies. “We need to look at those powers and functions especially when we look at the turnaround strategy [for PetroSA],” the minister said.
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