SA’s new state-owned petroleum entity, which is merger of three Central Energy Fund (CEF) subsidiaries — iGas, the Strategic Fuel Fund (SFF) and PetroSA — has begun operations a week later than scheduled, after an agreement with organised labour and non-unionised employees of merging entities.
The SA National Petroleum Company (SANPC) will undertake a broad spectrum of responsibilities, including the exploration, production, refining, marketing and sale of petroleum products as well as supporting the growth and advancement of the country’s petroleum industry.
The company will be entitled to a 20% interest in petroleum rights, including exploration and production.
SA has modest oil and gas production but hopes to shore up exploration of oil and gas Orange Basin, which stretches from the Namibian coast into SA waters, and which holds an estimated 3.5-billion barrels of potential recoverable oil.
Minerals and petroleum resources minister Gwede Mantashe has previously voiced his support for more oil and gas exploration off the West Coast and fracking in the Karoo, despite opposition from anti-climate-change lobby groups that the move contradicts SA’s commitments under the Paris Agreement to reduce greenhouse gas emissions.
“The incorporation of the SANPC as a subsidiary of CEF group of companies will be an interim measure until the National Petroleum Bill is promulgated into law. However, for the SANPC to kick-start its operations, it would use the lease and assign model wherein certain assets of the merging entities will be leased to the new company,” SANPC spokesperson Jacky Mashapu said.
The lease-and-assign model helps the SANPC by letting it choose which assets to lease from Petrosa’s legacy assets, such as decommissioning liability and current operating challenges of the gas-to-liquid refinery, so it can avoid taking on old assets that might be risky or costly.
“This approach will improve the financial risk profile for SANPC to secure funding as well as provide a legally sound solution to deal with the constraints associated with the nonprofit status of SFF.
“To that effect, we expect that the SANPC will minimise the risk exposure to external dependency for finished products that threatens our security of energy supply in the country, impact positively the balance of payments for the country and keep associated industry and core skills inland.”
A total of 402 employees will be transferred during the first phase, with remaining employees transferring in the second phase after legacy assets are addressed.
“All other remaining employees (620 in total) associated with ring-fenced assets and operations within Legacy entity [that is PetroSA] would transfer in the second phase of the project once these assets have been turned around and optimised with the support of SANPC and CEF as the holding company,” Mashapu said.
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