Shambolic state oil firm ‘going broke’

Demoralised PetroSA staff say bosses running a ‘self-enrichment’ scheme

STATE-OWNED petroleum and gas producer PetroSA — which paid out millions in bonuses to executives last year — is on the verge of going broke.

A board presentation tabled two weeks ago detailed how cash reserves were at risk of running out by the end of the financial year on March 31.

“In the absence of urgent shareholder intervention, PetroSA’s goingconcern status is under threat, with real risk of closure,” said the report.

The report detailed how the company faced leadership instability, low staff morale, poor project executions, skill shortages and vulnerability of existing assets (oil wells).

The company also has problems with its refinery in Mossel Bay. In the 2014-15 financial year, it lost R14.5billion because of delays and poor management there — the biggest loss by a state-owned entity yet.

The report was presented to the PetroSA board on February 24. In it, executives said the company faced the risk of failing to extend the refinery beyond 2019 and being unable to comply with safety standards. In January, two workers at the refinery died after falling unconscious.

PetroSA lost R949-million this financial year. In December its cash balance was R2.5-billion, but a source within PetroSA said financial reserves had since dwindled to R900-million.

The report said voluntary retrenchments could save R429-million a year.

A petroleum engineer, who asked not to be named, said staff were kept in the dark about company finances.

The engineer said morale was low and accused the executive committee, which is dominated by people in acting positions, of running down the company while earning huge bonuses.

“All we’re told is that the company is being restructured,” the engineer said. “Financials are coming out shortly and they won’t paint a good picture. These actors have run down the company but got huge bonuses. These are the things that caused low morale.”

Another staff member said he was not surprised that the parastatal was teetering on bankruptcy.

“To me this is not a surprise at all. Remember we have liabilities worth billions regarding the demobilisation and abandoning of offshore wells related to the failed project of gas exploration off the coast of Mossel Bay. We’re worried about our jobs now.”

Concerned about “depleted feedstock and declining revenue streams”, the entity last year sold R5-billion worth of oil reserves without consulting the National Treasury. The barrels were allegedly sold for less than the market price.

The Department of Energy said the barrels sold were “rotation of unsuitable stock”.

The Sunday Times reported in December that PetroSA had paid senior executives millions in bonuses despite the R14.5-billion loss.

Eleven bosses received payouts totalling R17.3-million even after the board said they did not deserve them.

Asked how the bonuses were justified, PetroSA said these were not linked to the company’s performance but were part of a skills-retention scheme.

Legal experts and the National Union of Metalworkers of South Africa said there was no merit in paying millions in bonuses when workers were being retrenched.

Among those to benefit from the bonuses was PetroSA’s manager of geosciences and data, Andrew Dippenaar. He was responsible for the unsuccessful Project Ikhwezi, which explored for gas off Mossel Bay. He received R2.3-million even though Ikhwezi missed its targets. Dippenaar returned to work in July last year after nine months’ suspension amid board unhappiness about Ikhwezi. This led to the axing of former CEO Nosizwe Nokwe-Macamo and finance chief Lindiwe Mthimunye-Bakoro.

Furious mid-level employees accused their bosses of running a “selfenrichment scheme” and reported the issue to the Commission for Conciliation, Mediation and Arbitration.

The Central Energy Fund said PetroSA faced “financial challenges”. Its spokesman, Jacky Mashapu, said this was because of “the volatility of our operating environment” and “complex projects that did not yield the expected positive results”.