New State-owned petroleum company granted permission to begin operating

A new State-owned enterprise arising from a merger of three Central Energy Fund (CEF) subsidiaries – iGas, the Strategic Fuel Fund (SFF) and those divisions of PetroSA currently considered financially viable – has been granted approval to start operating and it will begin trading on April 1, 2025.

The approval has been made in terms of Sections 51(g) and (h) of the Public Finance Management Act (PFMA) and was granted by the National Treasury as the custodian of the PFMA.

Known as the South African National Petroleum Company (SANPC), the entity will be led by Godfrey Moagi but will be incorporated as a subsidiary of the CEF Group of Companies until the National Petroleum Bill is promulgated into law.

Both SANPC and the Bill have been championed by Mineral and Petroleum Resources Minister Gwede Mantashe, who is a vocal supporter of the continued exploration, development and use of fossil fuels in South Africa.

The National Petroleum Bill, which still requires parliamentary approval, outlines a broad mandate for the SANPC as the “State’s energy champion and facilitator of energy infrastructure across the energy value chain”.

Of the three merging entities, only iGas and SFF are regarded as financially viable to be merged into SANPC, along with PetroSA’s Trading division and its Ghana asset.

The remainder of PetroSA, including the gas-to-liquids (GTL) refinery in Mossel Bay, which is not operating, form part of what are termed “legacy assets” that will not be transferred into the SANPC.

There is no intention, however, to sell or close these assets and SANPC says turnaround plans are being developed.

“Work has begun to attend to the legacy assets which include the re-instatement of the GTL refinery and the decommissioning liability methodology and provisioning.

“Once all the matters relating to these legacy assets are resolved, they would be ready for transfer to the SANPC,” the company said in a statement.

To kick-start SANPC’s operations ahead of the new enabling legislation, a Lease and Assign model is being used, wherein certain assets of the merging entities will be leased to the new company.

“This 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 SFF.”

SANPC says the restructuring will have no impact on the approximately 1 000 employees of the affected entities.