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MINERAL RESOURCES AND ENERGY
REPUBLIC OF SOUTH AFRICA
SPEAKING NOTES BY THE HONOURABLE
MINISTER OF MINERAL AND PETROLEUM RESOURCES
MR GWEDE MANTASHE (MP)
SANPC STAKEHOLDER ENGAGEMENT
AFRICA ENERGY WEEK
7 OCTOBER 2024, CAPE TOWN ICC
It gives me a great pleasure to engage you on the work we started four years ago in our quest to rationalise some of our State-Owned Entities (SOEs) to establish the South African National Petroleum Company (SANPC).
The rationalisation of the Strategic Fuel Fund (SFF), iGas, and PetroSA into SANPC is informed by the commitment to stabilise our State-Owned Entities and refocus them to drive economic growth and development, as committed by President Cyril Ramaphosa in his 2020 State of the Nation Address.
The rationalisation of these three entities was anchored on the following:
· Improving Operational Efficiencies
· Improving the Scale and Market Share
· Operationalising a Commercially Viable National Petroleum Company
To improve operational efficiency within the Central Energy Fund (CEF) value chain and to deliver shareholder value, we sought to minimise duplications that inhibit the group from being a catalyst to reigniting the South African economy. We understood that merging these three entities will further result in enhanced cost reductions, integrated common systems and processes, and improved shared service models to maintain strategic relevance and sustain a competitive edge in a rapidly changing Oil and Gas industry.
In the last few years, the CEF Group experienced a turbulent period which negatively impacted on delivering its mandate. Several strategic initiatives were delayed due to operational inefficiencies that resulted in the Group losing market share and revenue decline. Whereas we have over the years ensured good governance in the CEF group, the implementation of the rationalisation process will, amongst other interventions, enable the Group to effectively leverage on the combined financial resources and operating assets of the three entities to bring stability and certainty, thereby ensure that the group remains globally competitive.
The operationalisation of a commercially viable National Petroleum Company will, undoubtedly, be a game-changer not only for South Africa, but for the African continent. This new entity is poised to play a critical role in supporting the government’s broader strategic initiatives as well as fostering regional integration on matters related to oil and gas.
A detailed baseline assessment showed that this merger has a potential to improve efficiencies and strategic investments, by unlocking R95 billion market opportunities and thus yield R1.5 billion in synergy optimisation. From these detailed assessments, we concluded that the merger by Amalgamation or by Subsidiary is legally not permissible in the short term, hence we opted for the Lease and Assignment model as it provides the opportunity to strategically select what is leased and assigned to the SANPC by ring-fencing or isolating PetroSA’s legacy assets.
We firmly believe that this approach will improve the financial risk profile for the 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.
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 will be ready for transfer to the SANPC.
While the SANPC Bill undergoes Parliamentary processes following Cabinet’s approval to submit to Parliament for its consideration and adoption, the endorsement by the National Treasury means that the SANPC can start operating as a new SOE albeit as a subsidiary of CEF.
As you are all aware, the refining capacity in South Africa is largely held by International Oil Companies (IOCs) which poses a risk to security of liquid fuels supply as most of these IOCs are shutting down refineries. To this effect, we expect the SANPC to minimise the risk exposure to external dependency for finished products that threatens our security of energy supply. Reality of the matter is that investing in local refining capacity to secure the supply of liquid fuels is a no regret option for any investor.
As a national champion that will hold oil and gas exploration rights on its own and hold shares through state carry method in privately held rights, the SANPC will require strategic partnerships and investment to realise its growth ambitions of being a leading player in the energy sector.
I, therefore, would like to take this opportunity to invite you all to partner with us and work with this emerging African Energy Champion to ensure security of energy supply and propel the socioeconomic development of the African continent to greater heights.
For its part, government will continue to create an enabling environment for greater investment and the acceleration of exploration and production of the nation’s petroleum resources as evidenced by the recent enactment of the Upstream Petroleum Resources Development Act.
The assent to the Act paves the way for the development of the nation’s petroleum resources in an orderly and ecologically sustainable manner, while promoting justifiable social and economic development. We are thus convinced that the enactment of the act for implementation will ensure the much-desired policy and regulatory certainty.
In closing, as the world renowned activist and author, Maya Angelou puts it, “If you are going to live, leave behind a legacy. Make a mark on the world that can never be erased”, a globally competitive SANPC, universal access to energy, and increased local refining capacity is a legacy I intend to leave behind.
I thank you.