Russian Gazprombank Africa deal to reboot PetroSA Mossel Bay refinery hits key deadline in April – Mantashe

Speaking on the sidelines of the parliamentary committee meeting, Mineral Resources and Energy Minister Gwede Mantashe said, “In April, we will get a budget (from Gazprombank Africa)”, emphasising the refinery assets would remain South Africa’s. 

According to the timelines presented to the mineral resources and energy committee, the technical verification is expected to be completed at the end of April, funding and investment decisions will be finalised by September, with financial close a month later. 

Cabinet in December 2023 approved Gazprombank Africa as partner for the PetrolSA’s gas-to-liquid (GTL) refinery built to produce synthetic petrol from gas and gas condensate. It has been under care and maintenance since 2020 when gas supplies started running short.

In its decision, the job creation potential was emphasised. “The refinery reinstatement has a potential to retain at least 2,000 direct site jobs, with an additional potential fixed term employment opportunities for 4,000 jobs during the construction phase,” cabinet said in its 8 December 2023 statement.

The deal estimated at R3.7-billion is controversial, not least of which is the sanctions imposed on Gazprombank in the wake of Russia’s invasion of Ukraine in February 2022. amaBhungane in November 2023 reported the deal was valued at R3.7-billion and the tender requirements were massaged in favour of the Russian-linked entity. PetroSA has denied this and said its legal opinion showed the deal would not contravene Western sanctions.

Read More on Daily Maverick: PetroSA pushes for R3.7bn deal with Russia’s Gazprombank despite concerns over partnership

On Wednesday Mantashe said it had been important to pursue a state-to-state agreement to ensure integrity of the shareholding. He appealed patience until April, but did not provide further details. 

The parliamentary mineral resources and energy committee was told getting PetroSA’s Mossel Bay GLT refinery up and running was a priority – and a key part of South Africa’s overall gas sector development aims. 

“Of paramount importance is that production is reinstated so it can sustain itself,” PetroSA acting CEO Sesakho Magadla told MPs, adding the plant would also play a role in the broader domestic gas sector. 

Current plans for the Mossel Bay refinery are to boost production over three years from a starting 18,000 barrels a day to 46,000 barrels a day. Costs are estimated at R4-billion, according to the presentation document to MPs.

Once the refinery was up and running its operations could link to the offshore gas discovery in Block 9 held by TotalEnergies. Applications for production rights in Bock 11B/12B are underway. Officially, it’s expected production would assist in avoiding the gas shortages anticipated once Sasol stops gas delivery to large users because supplies from Mozambique are drying up.

Magadla confirmed the full technical verification Gazprombank Africa is undertaking at its own costs would be completed in the next couple of months. Once that was done, the terms and conditions of the contract could be finalised.

Crucial issues include faster gas offloading once the refinery is reinstated – such operations at Durban port are five to ten times faster – work on the existing pipeline and also with regards to the expected truck road traffic between Mossel Bay and PetrolSA’s depot in Bloemfontein.

All this was part of the Gazprombank Africa deal.

“It is important for us to get the (Mossel Bay) plant running and it must pay for itself,” Magadla told Daily Maverick on the sidelines of Wednesday’s committee meeting.

 Read more on Daily Maverick: Cabinet signs off on controversial R3.7bn Gazprombank deal to reboot Mossel Bay refinery

A factor that potentially could complicate the Mossel Bay refinery reinstatement timeline, and the Gazprombank Africa deal, is the 29 May election.

While Mantashe on Wednesday was upbeat the ANC would return to government - “with 60%... the opposition is in disarray,” he told journalists on the sidelines – it would not be clear who the next post-elections mineral resources and energy minister would be. Or even whether there would be such a ministry, given the speculation that mineral resources and energy may be split into separate departments. DM