Cabinet has approved appointment of a professional restructuring company that specialises in mergers to investigate the most viable model for a single ‘National Petroleum Company’.
The approval follows a briefing this week relating to ongoing work to rationalise the oil and gas subsidiaries of the State-owned Central Energy Fund (CEF).
On May 22, the CEF issued a request for proposal, with a closing date of June 11, for a service provider to develop a CEF Group corporate plan and merge three CEF subsidiaries into a single entity. A compulsory virtual briefing was held with potential respondents on May 28.
Cabinet indicated in a statement that the rationalisation would result in PetroSA, the Strategic Fuel Fund (SFF) and iGas being merged into one single National Petroleum Company.
“This gives effect to the announcement made by President Cyril Ramaphosa in his State of the Nation Address on 13 February 2020, to repurpose and rationalise a number of State-owned enterprises to support growth and development,” the Cabinet statement read.
In May, Mineral Resources and Energy Minister Gwede Mantashe told lawmakers the CEF companies would be restructured as part of broader government efforts to stabilise struggling State-owned enterprises.
The performance of CEF had been undermined primarily by PetroSA, which had incurred cumulative losses of R20-billion since 2014 and was currently producing at a rate of only 6 000 bbl/d, while retaining a headcount in line with a daily production rate of 18 000 bbl.
The group’s reputation had been further undermined by governance failings at the SFF, which in 2015 illegally sold 10.3-million barrels of South Africa's strategic fuel reserves at a price of around $28/bl, while the prevailing Brent crude price was about $40/bl.
The CEF told lawmakers that it planned to abandon its hands-off parenting strategy in favour of becoming a ‘strategic guide’, whereby group strategy, capital expenditure and funding would be centralised.
The organisation also indicated that it would be acquisitive, leading to speculation that it would buy Sasol’s fuel retail network; a report that has since been dismissed by both the CEF and Sasol.