PetroSA seeks partners to help it back to full production

After three years of suspended production, PetroSA is on the cusp of releasing a request for proposals (RFP) to finance and implement the restoration of its gas loop and liquids refinery and flow assistance oil platform in Mossel Bay to full production levels.

The state-owned entity plans to use the two facilities in the Western Cape to process gas and condensate, with a long-term feedstock solution under development to supply feedstock at production capacity from 2027. Production at the facilities was suspended in 2020 due to feedstock challenges.

While PetroSA is ideally looking to partner state-owned companies, pundits believe the private sector should be given the opportunity to participate in the drive, adding that state-owned oil and gas entities have been sidelining the private sector.

In terms of the RFP, PetroSA will give preference to partners or bidders who are state-owned or state-supported oil and gas entities from oil- and gas-producing nations with access to feedstock and “a proven and formalised relationships with oil- and gasproducing nations”.

The Central Energy Fund (CEF) subsidiary said project developers able to finance the development at risk and recover their development costs at financial close are preferred. The closing date to respond to the RFP, which Business Times has seen, is February 20.

The chair of parliament’s portfolio committee on mineral resources & energy, Sahlulele Luzipo, said the committee was aware of the challenges and concerns around the Mossel Bay facility and the adoption of PetroSA’s turnaround, as well as their strategic plan.

“It is therefore hoped that the issue with regards to stock at the refineries will be resolved soon, including the issue of partnership. I think it will be incorrect for a portfolio committee to express a view on any procurement process, including this one which I believe is underway at PetroSA,” said Luzipo.

He said the committee expected a fair, objective and transparent process that does not disadvantage the entity or the interests of the country.

Another CEF subsidiary, the Strategic

Fuels Fund (SSF), is finalising plans to acquire 60% of Avedia Energy since the Competition Tribunal approved the acquisition late last year.

COO Mfona Nkutha told Business Times the approval is just the first step in fulfilling a number of contractual obligations before the acquisition is finalised.

“Right now we are going back to those obligations to assure that aspects that were agreed to and the condition precedent before

the actual payment of the funds are met. A lot needs to happen before we become a shareholder and we are working with the legal team to get into that position,” he said.

Nkutha said the Saldanha Bay terminal can produce more than 600,000 tonnes of liquefied petroleum gas (LPG) a year and if the country were to invest in the terminals, cylinders and other infrastructure, the number could go up.

“If you compare South Africa with other

African economies that consume LPG, our consumption is lower per capita. It’s at around 9kg, and when you move into other economies it is between 12kg and 18kg per capita. There is no reason for economies like ours not to rely so heavily on this power for cooking and heating,” Nkutha said.

He said raising South Africa’s gas household consumption would be advantageous as the load-shedding crisis continues and an 18.65% electricity tariff increase looms in April.

During the Competition Tribunal’s hearings on the proposed acquisition, one operator at the Saldanha Bay LPG terminal, Sunrise Energy, opposed the deal, arguing that it would increase the state’s dominance in the sector. Nkutha said the SSF has not heard directly from Sunrise since the acquisition was approved.

“The discussion with us has always been through legal teams and ours has not heard anything from Sunrise’s legal representatives, so our assumption is that they have accepted the decision of the tribunal,” Nkutha said.

Sunrise Energy CEO Rajen Singh said: “Sunrise Energy has noted the decision of the Competition Tribunal to approve the acquisition of a 60% stake in Avedia Energy by the Central Energy Fund. The decision of the Tribunal will have no material effect on Sunrise Energy’s plans for the future of its LPG import terminal in Saldanha Bay.”

DA energy spokesperson Kevin Mileham said he was concerned that plans by the SSF and CEF will continue the government’s failed track record in various sectors.

He said the work of getting the Mossel Bay facility back into operation required significant investment and support.

“The problem with PetroSA at Mossel Bay is they have no feedstock or material to process. Even if they had, the plant needs significant upgrades. That will require significant investment from PetroSA and the CEF,” said Mileham.

“There is absolutely room for private players [in Mossel Bay]. My concern with SSF taking the Saldanha Bay terminal is that they are not a trader in wholesale liquid fuels. They should be the strategic reserve of the economy. By entering this field they are closing the door to private players.”