Johannesburg- The South African National Petroleum Company (SANPC) is pleased to announce that it has been granted an approval to start operating as a new State-Owned Petroleum Company of South Africa, in terms of the s51(g) (h) of the Public Finance Management Act of 1999.

This approval is the culmination of a policy statement made by made by the Honourable President Cyril Ramaphosa during his State of the Nation Address on the 13th of February 2020. He announced that the government intends to repurpose and rationalize state-owned enterprises to support growth and development in South Africa.

Under this national directive, on the 10th of June 2020, Cabinet approved the DMRE’s request under the stewardship of Minister Gwede Mantashe to merge three subsidiaries of the Central Energy Fund (CEF); namely the South African Gas Development Company SOC Limited (iGas), PetroSA and Strategic Fuel Fund (SFF).

The rationalization of these subsidiaries into one single SA National Petroleum Company (SA NPC) is on the basis that each company be efficiently structured so as not to transfer operational inefficiencies and going concern issues into the new entity.

Out of the three merging entities, only iGas and SFF are financially viable to be merged into the new entity subject to key legal requirements. However, following a rigorous assessment of the PetroSA business, the only financially viable division to be merged into the new company is Trading and the Ghana asset.

The remainder of the business that does not form part of the SANPC will form part of legacy assets requiring 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 CEF Group of Companies 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 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 by ring-fencing or isolating PetroSA’s legacy assets such as 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 deal with the constraints associated with the non-profit status of SFF. At the same time, work has begun to attend to the legacy assets which include 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.

The Lease and Assignment transaction is thus deemed necessary and the most effective approach for the merger.

With the combined strengths of the three subsidiaries, a solid financial position, and robust stakeholder support, the SANPC is wellpositioned to leverage these benefits and seize the R95bn market opportunity.

The SANPC would be poised to become a leading player in South Africa’s energy sector, ensuring energy security, driving new technologies, developing, and enabling essential infrastructure, fostering strategic partnerships, and propelling social and economic development.

For more information, please contact:

Jacky Mashapu

Executive: Communications and Stakeholder

Cell: 081 011 7528

Email: Jacky.Mashapu@sa-npc.co.za