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PetroSA to spend big on Mossel Bay refinary

Mossel Bay was largely built on the state owned petrol company – PetroSA. In recent times many locals have experienced the hardship as the company has founded – to the extent of losing 14 billion in 2015. However, this report from the company, shows that they are not giving up on the refinery plant in Mossel Bay. Good news for the towns future!

State-owned gas-to-liquid producer PetroSA plans to spend more than R3bn over the next five years to improve the refining capacity of its Mossel Bay plant and to ensure the security of its energy supply.

It will also be seeking strategic partnerships to assist in the implementation of its plans.

The company, which produces 75% of the revenue of its parent, the Central Energy Fund (CEF), has had to deal with declining feedstock for the plant for several years and has to overcome this to ensure the future sustainability of its operations. Challenges with feedstock from its offshore wells has meant it has had to import some feedstock such as liquid gas condensates recently, but this is at a much higher cost.

The shortage of indigenous feedstock has also meant that the refinery is producing far less than its productive capacity of 45,000 barrels of fuel per day.

A turnaround plan was submitted to the Department of Energy last week, CEF acting group CEO Godfrey Moagi told members of Parliament’s select committee on economic and business development.

Moagi said most of the R3bn initiatives “are in the feasibility/ front-end loading stages as part of the long-term planning for ensuring the sustainability of the gas-to-liquid refinery”.

“Coupled with these modifications and ongoing refinery upgrades, PetroSA will aggressively invest about R500m in sales and marketing assets in the next year to enhance its presence and customer service. In the medium- to long-term period PetroSA will be embarking on a number of strategic partnerships in the upstream area as part of the organisation’s efforts for derisking the upstream operations and getting access to the funding and technical skills required to execute large complex upstream projects.”

Exploration projects required substantial capital investments and could take up to five years before they showed a return, Moagi said. With the low oil price, the international trend was for assets to be mothballed and capital investments to be halted.

PetroSA currently has exploration and/or production rights to 150,413km² off the southern and western coast of SA and is also involved in offshore production in Ghana.

Kgothatso Mlaba, manager in the office of the fund’s CEO, noted that over the past 10 years PetroSA had funded all its major capital projects from its own balance sheet “with minimal success in a complex and risky oil and gas industry. A case in point was the Ikhwezi Project that wiped out a substantial amount of PetroSA’s cash balance. With upstream risks mounting and accessing reserves more difficult, PetroSA has had to change tack and seek more collaborative business relationships to ensure long-term growth.”

The strategic partnership model would improve PetroSA’s competitive advantage “and usher in a different form of investment philosophy which goes beyond price. Partnership may cut right across the value chain.”

Upstream projects, especially deepwater ones, were becoming too big for a single company to finance, he said. No single company could also carry the risk of large-scale exploration and production projects alone.

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