Mineral Resources and Energy Committee makes oversight visit to PetroSA refinery

The Portfolio Committee on Mineral Resources and Energy conducted an inspection at the PetroSA Gas-to-Liquid (GTL) refinery in Mossel Bay recently. There it learned more about PetroSA’s turnaround plans,

The upstream consists of exploration, rigging and transportation of natural gas from the coast to the refinery plant. The middle stream involves the process of transforming and refining natural gas into products such as petrol, diesel, paraffin, alcohol and distillates. The downstream refers to the stage where a finished product is stored in tanks, marketed and distributed to the market.

PetroSA’s Chief Executive Officer (CEO), Mr Pragasen Naidoo, told the committee that the turnaround plan was necessitated by low productivity levels due to depleting feedstock, which affect profitability. Mr Naidoo said the GLT refinery in Mossel Bay depends entirely on natural gas to operate.

“The depleting reserves of natural gas meant that production at the refinery had to be reduced to a minimal level in order to keep operating for a period of time until a solution is found,” he said.

Mr Naidoo further said other challenges include equipment that has not been maintained for a number of years, meaning that the refinery would be unable to operate optimally, even if there where high reserves of natural gas available. Accordingly, part of the plan is to sell non-core assets, valued at about R100 million.

The committee expressed its confidence in the turnaround plan, and said it is encouraging that it required no financial assistance from government. The plan outlines interventions at different streams, including the importation of liquefied natural gas (LNG) to operate the refinery and the acquisition of certain things on the downstream in order to operate at that level.

Mr Naidoo said preparations are ongoing to invite proposals on how best to bring LNG to the refinery. In 2012, PetroSA, a subsidiary of the Central Energy Fund (CEF), embarked on a R14.5 billion exploration initiative, Project IKhwezi, that did not yield any positive results.

The committee asked to be provided with a list of names of individuals involved in the project who are still with the department, PetroSA and the CEF, as well as a consequence management report. They further noted an undertaking by the board of PetroSA to make a presentation on the project losses. The committee further undertook to support the Department of Mineral Resources and Energy (DMRE), CEF and PetroSA in order to ensure that the turnaround strategy is implemented in full, so that the company can return to profitability.

A member of the committee, Mr Mikateko Mahlaule, said: “It has now become clear as to what PetroSA is doing currently and where it wants to go. One can tell that the turnaround plan is well thought through and I am happy that even the Auditor-General seems to recognise your work, as you moved from a qualified to an unqualified audit opinion.”

While on the same oversight visit, the committee also inspected two facilities where the DMRE has stored 2 000 solar water geyser units. The committee noted that although this project started in 2013, the units were only delivered in April 2019 and only five have been installed in a pilot training scheme.

The committee also met with the Mossel Bay Local Muncipality, where the municipal manager expressed concern about PetroSA, as the municipality believes that the company’s closure will negatively affect the local economy. Noting the concern, the Chairperson of the committee, Mr Sahlulele Luzipo, said bilateral engagements must take place between the chief executive officers of PetroSA, the CEF, and the mayor of the Mossel Bay Local Municipality.