PetroSA pushes for R3.7bn deal with Russia


  • PetroSA wants to partner with Russia’s Gazprombank to restart the gas-to-liquids refinery in Mossel Bay.
  • The bid for this project had unusually strict criteria that saw the other 19/20 bidders disqualified.
  • The PetroSA board and bid committee have raised concerns about awarding the bid to Gazprombank as it is currently under US sanctions.

The state-owned Petroleum Oil and Gas Corporation of South Africa (PetroSA) wants to partner with Russia’s Gazprombank to restart the gas-to-liquids refinery in Mossel Bay.

PetroSA advertised a tender in January looking for a partner willing to invest at least $200-million (R3.7-billion) to refurbish the refinery.

Twenty companies submitted bids, but the unusually strict technical criteria meant that 19 of the 20 were eliminated, leaving Gazprombank’s local subsidiary, GPB Africa & Middle East, as the only qualifying bid.

However, leaked documents, seen by amaBhungane, reveal that the PetroSA bid evaluation committee and board raised concerns about partnering with Gazprombank, which is under US sanctions, and advised PetroSA to enter into negotiations with other bidders, including Azerbaijan’s state oil company, SOCAR, and China’s state-owned energy infrastructure company, CMEC.

PetroSA pushed back with a legal opinion from Ledwaba Mazwai Attorneys that said it had “no right to entertain other offers” aside from the Russians’. Although the lawyers advised PetroSA to cancel the tender and start again, it appears to have ignored this advice.

Instead, PetroSA presented a second legal opinion from Centurion Law Group, a boutique law firm run by fossil fuel lobbyist NJ Ayuk, arguing that the risk of South Africa facing sanctions over its relationship with Russia was low.

Related news: In 2007, NJ Ayuk was convicted of fraud in the US after pleading guilty to illegally using Rep. Donald Payne’s stationery and signature stamp in a series of attempts to obtain visas to the United States for people from his native country of Cameroon. He was sentenced to 18 months’ probation and expelled from the country. Read more. Ayuk and his advisory firm, Centurion Law Group, have also been flagged by Ghanaian media. In 2015, The Finder online newspaper wrote that Centurion director Genevive Kabukuor Ocansey was arrested and detained for allegedly aiding a Cameroonian — Eyong — to launder $2.5-million into Ghana and repatriate $1-million to Equatorial Guinea. Read more

This contradicts the Reserve Bank’s warning back in May, after it added ‘secondary sanctions’ to its list of nine major financial risks facing the country.

“[T]he possible imposition of secondary sanctions on South Africa … could lead to financial instability in South Africa,” the Reserve Bank warned. “Should this risk materialise, the South African financial system will not be able to function if it is not able to make international payments in USD…”

A source close to the bidding process told amaBhungane that PetroSA plans to award the contract to Gazprombank anyway.

We sent three pages of questions to PetroSA two weeks ago. On Friday, spokesperson Nonny Mashika provided a one-line response: “PetroSA is currently undergoing Stakeholder Engagements with various governance structures and therefore cannot comment on the matter.”

Bleeding Eskom

The gas-to-liquids refinery is a critical part of energy minister Gwede Mantashe’s plan to jumpstart the gas industry and resuscitate PetroSA.

Built in 1989 by PetroSA’s predecessor Mossgas, the refinery was intended to help the apartheid government bypass the United Nations oil embargo. Normally, petrol and diesel are made by distilling crude oil. The Fischer-Tropsch method used in the gas-to-liquids refinery instead produces synthetic petrol and diesel from natural gas and gas condensate.

When running, it can process 46 000 barrels of fuel per day, but the refinery has been ‘parked’ since December 2020 when it ran out feedstock.

For now, PetroSA buys imported diesel and sells it on to Eskom at a profit. But the margins on trading diesel are small and PetroSA’s long-term plans rely on rebuilding its inhouse refining capacity.

If PetroSA’s deal with Gazprombank goes ahead, the Russian company will not only invest R3.7-billion and be responsible for refurbishing the refinery, but also provide PetroSA with gas condensate, at least until domestic natural gas becomes available.

In exchange, Gazprombank will get a share of the profits.

Any diesel that the refurbished gas-to-liquids refinery produces is likely to be sold to Eskom to burn in its Open Cycle Gas Turbines.

Loadshedding has provided a lifeline to PetroSA and helped grow its turnover from R12-billion last year to an estimated R20-billion this year. For a partner like Gazprombank this could be a goldmine.

Unsolicited bids

The request for proposals (RFP) raised eyebrows when it was issued in January.

It revealed that PetroSA had already received unsolicited bids and suggested that these so closely matched the criteria for the tender that bidders were told: “Entities/Applicants who previously submitted unsolicited proposals in the last 6 months need not resubmit.”

In fact, three state-owned entities had shown interest: Russia’s Gazprombank, Azerbaijan’s SOCAR and China’s CMEC. But the only detailed proposal had come from Gazprombank………….

Author: Susan Comrie

This is an extract from a main article with more information Susan Comrie for the amaBhungane Centre for Investigative Journalism. 

Read the rest of this exclusive story from the amaBhungane Centre for Investigative Journalism HERE


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