A policy statement by President Cyril Ramaphosa on Wednesday resulted in the formation of a new state-owned petroleum company, the South African National Petroleum Company (SANPC).
The SANPC was 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. It will ensure energy security, drive new technologies, develop and enable essential infrastructure. The state-owned-enterprise (SOE) will also foster strategic partnerships and propelling social and economic development.
Country’s development and economic growth
It is also expected to oversee strategic planning, coordination and governance of the country’s petroleum resources. As well as 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.
Its formation follows Ramaphosa’s February 2020 State of the Nation Address (Sona). He announced government’s intention to repurpose and “rationalise” SOEs to support growth and development in South Africa.
On June 10 2020, Cabinet approved the Department of Mineral Resources and Energy’s (DMRE) request. The request was to merge the three subsidiaries of the CEF. namely the South African Gas Development Company SOC Limited (iGas), PetroSA and the SFF.
“The rationalisation of these subsidiaries into one single SA National Petroleum Company is on one basis. That each company be efficiently structured. So as not to transfer operational inefficiencies and going concern issues into the new entity.
Financially viable entities
“Out of the three merging entities, only iGas and SFF are financially viable to be merged into the new entity. This is subject to key legal requirements. But an assessment of the PetroSA business showed only one financially viable division to be merged into the new company. That is Trading and the Ghana asset,” 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. These will require further work to be done before they could be transferred into the SANPC.
“In the interim, the SANPC will be incorporated as a subsidiary of [the] CEF Group of Companies. This 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. This wherein certain assets of the merging entities will be leased to the new company, the SANPC.”
The proposed Lease and Assignment model provides the opportunity to strategically select what is leased and assigned to the SANPC. This by ring-fencing or isolating PetroSA’s legacy assets. These include decommissioning liability and current operating challenges of the Gas to Liquid Refinery.
“This approach will improve the financial risk profile for SANPC to secure funding. As well as provide a legally sound solution to the constraints of the non-profit status of [the] SFF. At the same time, work has begun to attend to the legacy assets. This includes the re-instatement of the Gas -To- Liquids (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.”
Leading player in South Africa’s energy sector
The company said that the Lease and Assignment transaction is deemed necessary. It is the most effective approach for the merger, it said.
“With the combined strengths of the three subsidiaries. A solid financial position, and robust stakeholder support, the SANPC is well-positioned. That is 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. It will ensure energy security and drive new technologies. Also develop and enable essential infrastructure and foster strategic partnerships. It will also propel social and economic development,” said the company.
SAnews.gov.za
