New state-owned petroleum company formed in South Africa

Google+ Pinterest LinkedIn Tumblr +
  • A policy statement by South Africa’s President, Cyril Ramaphosa, has resulted in the formation of a new state-owned petroleum company, the South African National Petroleum Company (SANPC).ย 
  • The SANPC has been formed following the merger of the Central Energy Fund (CEF) subsidiaries, iGas, PetroSA and the Strategic Fuel Fund.

The SANPC is poised to become a leading player in the country’s energy sector ensuring energy security, driving new technologies, developing and enabling essential infrastructure, fostering strategic partnerships and propelling social and economic development.ย It is also expected to oversee strategic planning, coordination and governance of the country’s petroleum resources, contributing to the country’s development and economic growth.

The company has been granted approval to start operating in terms of the s51(g) (h) of the Public Finance Management Act of 1999.

The formation of the state-owned company follows President Ramaphosaโ€™s February 2020 State of the Nation Address (SONA) wherein he announced governmentโ€™s intention to repurpose and โ€œrationalizeโ€ state-owned enterprises to support growth and development in South Africa.

Under this national directive, on 10 June 2020, Cabinet approved the Department of Mineral Resources and Energyโ€™s (DMRE) request to merge the three subsidiaries of the Central Energy Fund (CEF); namely the South African Gas Development Company SOC Limited (iGas), PetroSA and Strategic Fuel Fund (SFF).

โ€œThe rationalization of these subsidiaries into one single SA National Petroleum Company is on the basis that each company be efficiently structured so as not to transfer operational inefficiencies and going concern issues into the new entity.ย Out of the three merging entities, only iGas and SFF are financially viable to be merged into the new entity subject to key legal requirements. However, following a rigorous assessment of the PetroSA business, the only financially viable division to be merged into the new company is Trading and the Ghana asset,โ€ the new petroleum company said in a statement on Wednesday.

It added that the remainder of the business that does not form part of the SANPC will form part of legacy assets requiring further work to be done before they could be transferred into the SANPC.

โ€œIn the interim, the SANPC will be incorporated as a subsidiary of [the]CEF Group of Companies until the National Petroleum Bill is promulgated into law. For the SANPC to kick start its operations, it would use the Lease and Assign model wherein certain assets of the merging entities will be leased to the new company, the SANPC.โ€

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 PetroSAโ€™s legacy assets such as decommissioning liability and current operating challenges of the Gas to Liquid Refinery.

โ€œThis approach will improve the financial risk profile for SANPC to secure funding as well as provide a legally sound solution to deal with the constraints associated with the non-profit status of [the]SFF. At the same time, work has begun to attend to the legacy assets which include the re-instatement of the Gas -To- Liquids (GTL) Refinery and the decommissioning liability methodology and provisioning.

โ€œOnce all the matters relating to these legacy assets are resolved, they would be ready for transfer to the SANPC.โ€

The company said that the Lease and Assignment transaction is deemed necessary and the most effective approach for the merger.

โ€œWith the combined strengths of the three subsidiaries, a solid financial position, and robust stakeholder support, the SANPC is well-positioned to leverage these benefits and seize the R95 billion market opportunity.

“The SANPC would be poised to become a leading player in South Africa’s energy sector, ensuring energy security, driving new technologies, developing, and enabling essential infrastructure, fostering strategic partnerships, and propelling social and economic development,โ€ said the company.

Author: Bryan Groenendaal

Share.

Leave A Reply

About Author

Green Building Africa promotes the need for net carbon zero buildings and cities in Africa. We are fiercely independent and encourage outlying thinkers to contribute to the #netcarbonzero movement. Climate change is upon us and now is the time to react in a more diverse and broader approach to sustainability in the built environment. We challenge architects, property developers, urban planners, renewable energy professionals and green building specialists. We also challenge the funding houses and regulators and the role they play in facilitating investment into green projects. Lastly, we explore and investigate new technology and real-time data to speed up the journey in realising a net carbon zero environment for our children.

Copyright Green Building Africa 2024.