Dirty Fuels Part 2: Petrosa’s R11-billion ‘contaminated’ petrol deal

• PetroSA pursued a three-year deal – potentially worth R11-billion – to buy chemically adulterated unleaded petrol from little-known company Nako Energy.
• But after only six months, the fuel was pulled from the market after numerous complaints from customers that it was staining the paintwork of their cars.
• Tests found that the fuel – sourced from the UAE – was pumped up with N-methylaniline, a chemical additive that improves the octane levels of low-quality fuel but leads to other problems, including gum build-up that can damage engines. 
• Despite the adverse test results and alarm from the fuel industry, PetroSA agreed to buy another cargo of the same fuel at a cost of R634-million, which it then struggled to sell.

In December 2023, TotalEnergies started to notice that something was off with a new kind of unleaded petrol that it was selling in the Garden Route.

The petrol, known as Mogas 95, left stains on the petrol pumps. Worse, it had damaged the paintwork on some of customers’ cars. In some cases, the only solution was to have the cars resprayed.

Unbeknownst to Total, its rival Caltex was having the same problem in Knysna: cars and motorbikes that filled up with the petrol were coming back with stains as well.

• The Sunday Times and Top Auto first raised the alarm about contaminated fuel in April 2024.

In December 2023, both Total and Caltex lodged formal complaints with PetroSA, the state-owned petroleum company that had supplied the petrol.

By February 2024, Shell and Engen had joined the chorus: where exactly had PetroSA sourced this fuel, they wanted to know, and what was causing the stains?

A year earlier, PetroSA had been offered an enticing deal: a little-known company, Nako Energy, said it could secure unleaded petrol from the United Arab Emirates (UAE) at a very attractive price.

PetroSA would make 50 cents for every litre imported, meaning every oil tanker would generate R25-million of pure profit.

“There’s 50 million litres [in a tanker], so PetroSA would make R25-million profit, which is higher than any diesel cargo. That’s when really the interest in Nako became bigger,” the company’s founder and majority shareholder, Nkosinathi Ngwenya, told us.

He added, “[PetroSA] said, ‘No we don’t believe this is the case. Can you do a test cargo?’”

• If you’ve read part 1 of our Dirty Fuels investigation, you’ll know that Nako would later secure a R933-million diesel deal from PetroSA that was riddled with irregularities.

Ngwenya had a background in mining, but Nako itself had been in business for less than a year.

PetroSA had been in business for 58 years – long enough for cheap fuel from an obscure supplier to set off alarm bells.

Instead, the traders agreed to buy 50 million litres –  a R668-million experiment, just to see.

Petrol on steroids

95 octane petrol can be produced in two ways: it can be refined from crude oil, or it can be blended.

Nako’s fuel would be sourced from a supplier in Fujairah in the UAE that specialises in producing blended fuels.

The idea was to take a low-quality fuel – with an octane rating of 89 to 91 – and blend it with chemicals to boost the octane rating, turning an 89 into a 95 unleaded petrol.

A bit like producing petrol on steroids.

“This particular blend it was supposed to be a gamechanger,” PetroSA’s former head of trading Vusi Xaba, who oversaw the deal, recently told us.

Octane-boosters are an everyday part of the fuel business: until it was banned, lead was used to boost the octane of fuel. It has since been replaced by compounds like benzene and ethanol, but recently other chemical additives have been creeping into fuel as well.

Tests would later confirm that Nako’s chemical of choice was N-methylaniline (NMA), which is banned as a fuel additive in Europe, China and Russia because of concerns about its toxicity and the damage it can cause to engines.

Where NMA is used, it’s normally in concentrations of below 1.2%. At 3% NMA can boost the octane rating of fuel by up to 8 points, but at such high levels NMA causes other issues, including gum that leaves deposits on engines and causes seals to swell, increasing the chance of oil leaks.

According to an internal PetroSA investigation, tests later found that Nako’s fuel contained 6.6% NMA.

It’s unclear how much the PetroSA trading team knew when they placed the order.

They evidently knew enough to tell the board, in June 2023, that Nako’s fuel had a “pre-blend” octane rating “of 89-91”, making it a very low-quality fuel that would be boosted to a 95 “using low-cost approved components”.

Ngwenya told us that PetroSA had sent a technical team to view its suppliers’ blending facility in the UAE: “From January until about May this was the back and forth, testing and verifying, ‘Is this sanctioned product, who are your suppliers?’ … eventually they were satisfied.”

But Xaba was coy about whether PetroSA knew the fuel contained NMA: “Let’s put it this way, when a trader trades gasoline, they would say this has got intellectual property, so they wouldn’t actually be telling you … what components they bring and at what ratio – they would not necessarily share that with you.”

R150-million prepayment

In July 2023, Nako’s first shipment of unleaded petrol arrived in Mossel Bay, but for the next three months the oil tanker Sea Adore just sat waiting to discharge.

Part of the problem was that Nako – a brand-new company with no track record – did not qualify for credit and so had to pay its supplier upfront.

Author: Susan Comrie for amaBhungane