The State-owned Central Energy Fund (CEF) has transferred assets and funds to the South African National Petroleum Company (SANPC), with the view to unlocking R1.5-billion to R3-billion worth of synergies from the merger of three State-owned petroleum products companies, CEF Group chairperson Ayanda Noah has noted.

The rationalisation of State-owned companies the Strategic Fuel Fund (SFF), iGas and PetroSA, using a lease and assign model, into a properly structured single company is to prevent the transfer of operational and financial inefficiencies into the new entity, she said on May 14.

The aim is to minimise duplication, reduce costs, integrate common systems and processes and implement improved share service models to maintain the new company's strategic relevance and provide it with a competitive edge in the turbulent oil and gas market.

The new company will leverage the combined financial resources and operating assets of the three companies to improve stability and certainty, and play its role in ensuring South Africa achieves a just and fair energy transition, she said.

Further, the SANPC has been allocated R5-billion in funding, which will be made available in a phased approach to fund the operationalisation of the new entity.

The asset allocation and operationalisation aims to ensure that the SANPC can grow and optimise the use of the assets, and operate in the upstream and downstream markets, said SANPC chairperson Sipho Mkhize.

The company will also support broader government strategic initiatives and foster better integration with regional oil and gas markets.

Meanwhile, the lease model is being used to strategically select the assets assigned to the SANPC and ring-fence and isolate PetroSA's legacy assets, such as the distressed Mossel Bay gas-to-liquids (GTL) refinery and the decommissioning liability.

Thus far, 402 personnel from the three entities have been transferred to the SANPC, but key staff have been left in place in the former entities to manage these distressed legacy assets and to support their repair and reinstatement over the long term, said Noah.

Specifically, the SANPC will pay leases to these legacy companies for the use of the assets, based on the discounted cashflows of the assets.

“We need to be aware that getting the Mossel Bay refinery back online will require more money than the lease amounts will provide, and these distressed assets will be put on hold for a while.

“We are looking at different models, including partnerships, to get the refinery back to operations,” said SANPC CEO Godfrey Moagi.

The Sapref refinery, however, is a different case and it will investigate leveraging public-private partnerships to operationalise the refinery, he added.

South Africa imported 18.7-billion litres a year of refined petroleum products of the 25-billion litres a year consumed in the market in 2022, which is marked decline from the 80% finished products it had locally refined in 2010.

“We are importing poverty into the country because jobs have been shed downstream and the closure of the refineries places the country in a difficult situation,” said Noah.

The new company's area of focus is to ensure that the country does what it can to stabilise energy security.

“Key for [the CEF] is to ensure the Sapref refinery comes back online and, through it, boost energy security,” she said.

The CEF has acquired the interests of energy companies Shell Downstream South Africa and bpSA in the Sapref land and associated assets, including crude and finished product tanks, process units, pipelines from the Island View terminal and the single buoy mooring for crude imports.

The acquisition of these assets forms the core of the CEF's investment and growth strategy to lay a foundation in the energy value chain to bolster the country's energy security, said Noah.

Plans are being developed to rebuild Sapref, now renamed the SANPC refinery, and increase its throughput capacity from 180 000 bl/d to 600 000 bl/d, she noted.

MOSSEL BAY GTL
Meanwhile, the SANPC has offered to lead or participate in a priority project to resuscitate the Mossel Bay GTL refinery.

It will prioritise infrastructure investment in Voorbaai in Mossel Bay and the single buoy mooring import facility to increase import capacity and reduce demurrage costs.

The company will also prioritise and support the settlement of PetroSA's trading debt, said Noah.

Additionally, the SANPC has committed to a profit-sharing agreement with PetroSA to stabilise and support PetroSA in the short term.

This is to support the turnaround plan of PetroSA through a risk-based process, and in recognition of the potential dire consequences of insolvency and liquidity risks, she said.

“We remain focused on the swift and practical implementation of solutions to turn around the ring-fenced assets and operations of the legacy entities, which will be progressively transferred to the SANPC once commercial and legal requirements are resolved,” Noah said.