PetroSA results shows R831 million net profit.Photo Supplied 1

Donwald Pressly

State-owned oil and gas company PetroSA, which reported a R1.4 billion profit for the 2012 financial year to MPs yesterday, sent signals that a multibillion-rand crude oil refinery in the Eastern Cape – likely to source Venezuelan supplies – was on track.

Appearing before the national assembly energy portfolio committee, chief executive Nosizwe Nocawe Nokwe-Macamo reported that the net profit was 54 percent up on the previous financial year, despite material impairments in two subsidiaries totalling R1.6bn.

Nokwe-Macamo, replying to questions about the crude oil refinery dubbed Project Mthombo, said feasibility studies would be completed in December. She did not believe the project would be moved from its envisaged site at Coega outside Port Elizabeth, even though there was no pipeline running from the area.

“There is a pipeline in Durban,” she said, urging journalists not to dwell on the issues of how the refined products would be transported.

However, it was understood that it was envisaged that this would be shipped from Coega to the Durban harbour to be piped inland. The costs of the project were not provided but previous Department of Energy estimates put it at more than R40bn, but that was without the required connecting infrastructure and possible power plant feeder.

Avhapfani Tshifularo, the executive director of the SA Petroleum Industry Association, said he could not comment on PetroSA’s Project Mthombo.

Kevin Hustler, the chief executive of the Nelson Mandela Bay Chamber of Commerce, acknowledged that there were some “challenges” facing the project, these included the fact that Venezuelan crude was “hard” compared with other imports, but the chamber was “behind the placement of the project here in the Coega industrial development zone (IDZ)”.

He said a stakeholder group – including the local university, the department, the chamber, the Coega Development Corporation and the Nelson Mandela Bay Metro council – was involved in driving the project.

Nokwe-Macamo noted that there would be a need for a “takeoff” of power from Eskom in the area – with the possibility that the company would be urged to build a power station in the area – but department sources said that an overseas investor might be interested in establishing a combined cycle gas turbine in the area.

The Coega IDZ reported that PetroSA had signed a joint study agreement with the China Petrochemical Corporation (Sinopec) and concept studies would lead “to refinery configuration” by the end of the year. “This will be followed by feasibility studies with Sinopec, which will prepare Mthombo for approval.”

It said Mthombo was key to the development of South Africa’s liquid fuels sector.

Hustler said that by January it was hoped there would be “firm commitments” to the project. Meanwhile, ID MP Lance Greyling noted that Auditor-General Terence Nombembe had reported R2.5bn in “material impairments” for losses sustained by PetroSA Egypt and PetroSA Equatorial Guinea over the last two years.

He said PetroSA had engaged in failed gas and oil exploration foreign ventures when it should have focused on building the local projects.

Chief financial officer Nkosemntu Gladman Nika explained that companies abroad were subsidiary companies. Their financial operations had been ring fenced.

This was like giving one’s son a loan to study, but when he graduated and found that he could not find a job, the father wrote off the amount.