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Bill outlines broad ‘energy value chain’ mandate for State petroleum company

Mineral Resources and Energy Minister Gwede Mantashe

Mineral Resources and Energy Minister Gwede Mantashe

Photo by Creamer Media's Donna Slater

14th November 2023

By: Terence Creamer

Creamer Media Editor


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Draft South African National Petroleum Company Bill  (1.07 MB)

Mineral Resources and Energy Minister Gwede Mantashe has released a draft Bill for public comment outlining the establishment of the South African National Petroleum Company (SANPC), which the proposed legislation defines as the “State’s energy champion and facilitator of energy infrastructure across the energy value chain”.

The Bill states that the Minerals Resources and Energy Minister will be the sole shareholder of the SANPC.

The proposed legislation outlines a consolidation of the entities currently associated with the Central Energy Fund (CEF) – including PetroSA, iGas, and the Strategic Fuel Fund (SFF) ­– and states that the company will pursue the “free carry model” outlined in the Upstream Petroleum Resources Development Bill, approved by the National Assembly in late October.

While the proposed State-owned entity will focus primarily on oil and gas exploration and production, as well as midstream and downstream operations and infrastructure, the Bill outlines a broad mandate empowering the proposed entity to acquire, generate, manufacture, market or distribute “any form of energy”, including renewable energy.

Such a mandate may imply a possible overlap with Eskom, South Africa’s vertically integrated electricity utility, which is itself undergoing far-reaching restructuring to separate its generation, transmission and distribution entities.

Mantashe, who is a strong supporter of the continued exploration, development and use of fossil fuels in South Africa, has also indicated previously that a new State-owned company could seek to repurpose some of Eskom’s retiring coal power stations to gas in a move that some commentators suggest reflects the Minister’s aspiration to create an ‘Eskom 2.0’.

The proposal also featured during an explosive interview by eNCA of then Eskom CEO André de Ruyter, who revealed that he had received a request from the CEF to transfer Camden, Hendrina and Grootvlei to the CEF. For its part, the CEF defended its approach to Eskom as a request to intensify gas-to-power collaboration between the two State-owned entities.

The official coal retirement plan has been thrown into question, however, amid intense power cuts and increasing political resistance to decommissioning, and there is a growing likelihood that the retirement schedule will be reviewed.

This life-extension plan could well receive impetus from a report written by a Vgbe-led consortium and commissioned by the National Treasury. The report has not yet been published but is expected to make technical inputs on the feasibility of extending operations at the aged plants of Arnot, Camden and Hendrina.

There has already been strong pushback against the recent retirement of Komati, even though the over 60-year-old station had only one of its nine units operating and producing at increasingly expensive rates when it was shut in late 2022.

The Presidential Climate Commission recently provided President Cyril Ramaphosa with recommendations on how future decommissioning should be implemented, following extensive engagement with stakeholders relating to the Komati experience. A formal report from the commission is expected to be published soon.

For its part, Eskom’s latest Medium-Term System Adequacy Outlook confirms that the shutdown plan used in previous such reports is under review.

Meanwhile, the Bill states iGas, PetroSA and SFF employees will be transferred to the SANPC once the legislation takes effect.

The draft Bill was published in the Government Gazette on November 13, with a 30-day comment period.


Edited by Creamer Media Reporter




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