It is obvious to most people in the oil industry that PetroSA is rapidly reaching the status of a tired and worn-out monument to apartheid, a gaping maw for taxpayers’ money.
Those in the industry back when PW Botha first mooted Mossgas can remember the advice sought and given by the oil majors. After the kind of detailed feasibility study the oil industry applies to its projects, each consulted company advised that the idea was not financially feasible or sustainable. Its access to petroleum condensate (oil and gas mixed) would not last much beyond 2011. It was simply not worth the investment of taxpayers’ money.
Apartheid security policy rode over everything in those days, so Mossgas went ahead in defiance of economic realities.
Past predictions
The accuracy of past predictions is now blindingly obvious. They are not predictions anymore. They are here.
Mossgas, re-named PetroSA, has reported an impairment of R14 billion for the 2014 financial year, the result of mismanagement of the process of finding and drilling for new sources of condensate to feed the plant.
Logic never gets in the way of political dreams and, in the case of PetroSA, there seems to be a belief that rhetoric, hopes and prayers, will make an economic miracle. It will not and PetroSA management seems finally to accept the inevitable.
The inevitable could be selling the whole thing as scrap to someone who will accept the compulsory job of cleaning up the environment it leaves behind. A less drastic and more sensible solution to rescue some benefit to the country, would be to give up refining and turn the facility into a large petrol, diesel and gas depot with a gas import terminal, a ship-to-shore pipeline, or both.
Meanwhile, Mossgas staggers on, soaking up taxpayers’ money, the executives fighting each other while raking in vast salaries, and generally making hay while the sun steadily dims.
The pattern is clear enough. There have been announcements that staff are to be cut by 40 percent (how many will be senior executives, one wonders)? That is 800 people without a job. Nevermind, generous redundancy payments will be had by all, no doubt. More taxpayers’ money into the maw.
Then there is Project Mthombo, which is coyly reported as “making slow progress”. Its chances of becoming reality are less than pigs learning to fly. Remember the fanfare a year or two ago, when PetroSA announced that it was going to build a huge refinery in Coega using crude oil from Venezuela that Presidente Commander-in-Chief Hugo Chavez was going to sell to PetroSA at less than market price (some kind of revolutionary solidarity). This generosity died with Chavez and the parlous state of the Venezuelan economy makes it unlikely it will be renewed.
Plans
So will PetroSA get (our) Treasury money for its grand Coega plans? Not if the Treasury officials know that petrol and diesel are sloshing around storage tanks all round the Indian Ocean waiting for buyers. There is no point in adding to it. It would be a wise decision as the price of oil continues to head south. Points and gold stars to the Treasury chaps. Perhaps.
Evidence that hope springs eternal in the PetroSA breast peppered its presentation to Parliament. Confessions of failure were almost an afterthought. Instead, it was a list of desperate hopes and possibilities.
Then there is another PetroSA “project” that was the result of wishful or maybe desperate thinking. It is called, Project Ikhwezi. This gambles to find enough gas to keep the Mossel Bay plant going.
The trouble with this kind of dreaming is that offshore drilling is an expensive business. It is a money pit until (and if) an economically feasible amount of petroleum is found. New wells yielded only 10 percent of what was expected. The latest is 5km deep with no sign of any gas.
Drilling for oil has a record of 10 dry wells to every find, and no guarantee it will be economically viable, but the lure of finding the 1 million standard cubic feet of gas that may, or may not, be there, probably means that more millions of rands will be sunk in another eight wells.
Parliament was told recently that, so far, Ikhwezi had soaked up billions and another R4.6bn would follow it this year.
PetroSA is looking to spend another R5bn on “downstream activities”. That is a rather coy way of saying the activities so far have not been successful. Attempts to buy Engen’s old refinery in Durban and its network of service stations failed miserably.
While the PetroSA ship leans over in a rising swell, hiring and then firing chief executives and putting senior managers on extended leave have continued apace, attracting a Hawks investigation.
To say it is a sorry state of affairs would be an understatement. The R14bn impairment gives it first prize in the contest by state-owned enterprises to lose money.
What can one call PetroSA? An Apartheid pigeon coming home to roost? PW Botha’s Revenge? Or simply, a Dead Duck? You decide.
* Keith Bryer is a retired independent communications analyst.
** The views expressed here do not necessarily reflect those of Independent Media.
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