A significant merger between PetroSA, South Africa’s national oil company, IGas, the national gas development company, and the Strategic Fuel Fund which has been in motion since June 2020 is now moving into its second phase following the conduct of feasibility tests in phase one.
Minister of energy Gwede Mantashe said the union of the entities will establish a state-owned South African National Petroleum Company (SANPC) that will allow the government to “participate meaningfully in oil and gas developments,” reports BusinessTech.
The merger forms part of the recently-tabled Upstream Petroleum Resources Development Bill that provides various objectives around petroleum rights licensing, exploration of petroleum, and management rights relating to petroleum in the country.
Additionally, the new corporation is expected to contribute to continual sustainable development and economic growth through strategic planning, coordination, and governance of the country’s petroleum resources, according to the minister.
Final draft submitted
In a recent Department of Mineral Resources and Energy Budget Vote, Mantashe said the final draft concerning the SANPC bill has been submitted to the state law advisor for constitutional certification which will bring Cabinet approval into effect.
The bill will then be gazetted for public comment in July, however, the minister is pushing for the finalisation of the bill “before the end of the term of this administration.”
Ayanda Noah, chairperson of the Central Energy Fund (CEF) which oversees IGas and the Strategic Fuel Fund, told Engineering News that “the merger will be a catalyst for unlocking economic growth in the country.”
“We are now focused on accelerating our efforts to finalise implementation of Phase 2, to get to those massive market opportunities,” she said.
Estimates from the SANPC project management team show that the corporation could earn R1 billion before interest, taxes, depreciation, and amortisation within three years of operating, and up to R20 billion by 2030, with the current market opportunities valued at R95 billion.
Phase two of the merger will therefore focus on the finalisation of key working capital commitments and other funding requirements, as well as leadership structures and transitional service agreements.
By this time in 2024, the CEF expects the SANPC to be “stabilised” with permanent employees already appointed. Until then, transitionary boards will fulfil statutory requirements and enable the execution of transitional activities.
The SANPC is expected to focus on South Africa’s over-reliance on imported fuel as more and more local refineries close their doors.
“The closure of crude oil refineries has presented a new set of challenges, with potential instability if not well-managed,” said minister Mantashe.
“Importation of petroleum products has reached unprecedented levels. The robustness of the distribution infrastructure will be tested when the Sasolburg refinery goes into a mandatory maintenance shutdown for four months scheduled for later this month.”
Contingency plans have been put in place to reduce the risk of fuel shortages in the future, however, until more local refineries are re-opened or established, shortages remain a risk that has the potential to severely impact prices at the pumps.
Keyword: South Africa one step closer to having a new state-owned petrol company