The newly formed State-owned South African National Petroleum Company (SANPC) and its holding company the Central Energy Fund (CEF) have reached an agreement with organised labour and non-unionised employees of the merging entities and CEF's subsidiaries, namely iGas, PetroSA and the Strategic Fuel Fund (SFF), on issues related to its initially planned go-live on April 1.

This agreement paves way for the SANPC to start operating as a fully-fledged subsidiary of the CEF, despite a week’s delay, the new company says.

The SANPC is expected to oversee strategic planning, coordination and governance of South Africa’s petroleum resources to contribute to the country’s sustainable development and economic growth.

However, the incorporation of the SANPC as a subsidiary of the CEF Group of Companies will be an interim measure until the National Petroleum Bill is promulgated into law.

For the SANPC to start its operations, it will use the lease and assign model, wherein certain assets of the merging entities will be leased to the new company.

The proposed lease and assignment model provides the opportunity to strategically select what is leased and assigned to the SANPC by ring-fencing or isolating PetroSA’s legacy assets, such as decommissioning liability and current operating challenges of the gas-to-liquid refinery, the SANPC says.

This approach will improve the financial risk-profile for the SANPC to secure funding, as well as provide a legally sound solution to deal with the constraints associated with the nonprofit status of the SFF.

To that effect, the SANPC expects it will minimise the risk exposure to external dependency for finished products that threatens security of energy supply in the country, impact positively on the balance of payments for the country and keep associated industry and core skills inland.

As part of the approved business case to operationalise the SANPC, 402 of the 1 022 employees of the merging entities will transfer during the first phase of the merger, which is effective immediately.

The remaining 620 employees, associated with ring-fenced assets and operations within the legacy entity, namely PetroSA, will transfer in the second phase of the project, once these assets have been turned around and optimised with the support of the SANPC and the CEF as the holding company, the SANPC points out.

Meanwhile, work has begun on addressing challenges surrounding the legacy assets, which include the re-instatement of the gas-to-liquids refinery and the decommissioning liability methodology and provisioning, as well as constraints associated with the nonprofit status of the SFF.

Once all the matters relating to these legacy assets are resolved, they will be ready for transfer to the SANPC.