The government has no intention of selling its struggling gas-to-liquid-fuel company PetroSA despite the “vultures” wanting to get their hands on it, mineral resources & energy minister Gwede Mantashe said on Tuesday.
In introductory remarks at a briefing by the Nuclear Energy Corporation of SA (Necsa), the Central Energy Fund (CEF) and CEF subsidiary PetroSA to parliament’s minerals and energy committee, Mantashe said that PetroSA is a “very important asset of the state” even though it is a “problem child”.
“We are resolute that PetroSA is not going to be sold to anybody even if they show us a lot of money,” said Mantashe.
PetroSA operates the Mossel Bay gas-to-liquid-fuel refinery, now undergoing care and maintenance because of the lack of feedstock it used to obtain from its reserves off the coast.
The government aims to create an SA national petroleum company through the merger of PetroSA with two other CEF subsidiaries, iGas and the Strategic Fuel Fund (SFF). PetroSA, by far the biggest entity in the CEF group, is projecting a loss of R490m on revenue of R18.9bn in the 2021/2022 financial year while the CEF group is projecting a net loss of R43.7m, SFF a profit of R546m and iGas a profit of R494m.
Mantashe said the merger process is taking longer than expected but is on track. The SFF’s strategic oil stock in Saldanha Bay, sold illegally a few years ago, is now back in the state’s hands, he said.
CEF chair Ishmael Poolo said the cabinet asked the group to do further work on the merger which had been completed. If accepted, he expected there to be progress with the formation of the new company by the end of the current financial year.
In June 2021, a “war room” consisting of representatives of the department of mineral resources & energy, CEF and PetroSA was established to address the commercial sustainability of PetroSA and to stem its financial bleeding.
PetroSA CEO Pragasen Naidoo told MPs the war room had “been able to make incremental but significant progress”. The progress, though slow and painstaking, enabled the organisation to reduce operational costs, preserve much-needed cash and extend the company’s going-concern status while bringing about the required confidence to various credit lenders and strategic partners, he said.
“We are by no means out of the woods but we believe we are making progress in the right direction,” he said. Key decisions will have to be made in coming months on issues such as the sale of noncore assets, evaluation of feedstock options and a reduction in headcount.
CEF nonexecutive director Stephen Poya stressed that it was critical for PetroSA to get funding so that its refinery could begin operating again.
The committee was also briefed by Necsa chair David Nicholls and CEO Loyiso Tyabashe on the turnaround of the entity, which has recorded losses for the last four years with a further loss of R20m expected for 2022/2023. It expects to break even thereafter, a significant improvement on projections a year ago which forecast the turnaround to occur only in 2027. Nicholls said the governance of Necsa had been strengthened since the new board was appointed two years ago.
CFO Precious Hawadi insisted that Necsa was a going concern. Her presentation noted that the state of the company’s finances had “triggered a fundamental review of the organisation and its business model. The rationalisation/repurposing programme is ongoing and is aimed at ensuring urgent recovery.”
Tyabashe said he believed the organisation had already turned the corner. Costs had been cut and new avenues for revenue were sought.
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