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South Africa launched a new state-owned petroleum company, the South African National Petroleum Company (SANPC) yesterday.

The SANPC was formed following the merger of the Central Energy Fund (CEF) subsidiaries, iGas, PetroSA and the Strategic Fuel Fund.

According to the statement released by the government, SANPC is poised to become a leading player in the country’s energy sector ensuring energy security, driving new technologies, developing and enabling essential infrastructure, fostering strategic partnerships and propelling social and economic development.

It is also expected to oversee strategic planning, coordination, and governance of the country’s petroleum resources, contributing to the country’s development and economic growth. The entity has been granted approval to start operating under s51(g) (h) of the Public Finance Management Act of 1999.

The formation of the state-owned company follows President Ramaphosa’s February 2020 State of the Nation Address (SONA) wherein he announced the government’s intention to repurpose and “rationalize” state-owned enterprises to support growth and development in South Africa.

“The rationalization of these subsidiaries into one single SA National Petroleum Company 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.”

It added that 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 [the] 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 SANPC will be incorporated as a subsidiary of the CEF Group until the National Petroleum Bill is promulgated into law. The SANPC said it is 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.

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.

“With the combined strengths of the three subsidiaries, a solid financial position, and robust stakeholder support, the SANPC is well-positioned to leverage these benefits and seize the R95 billion market opportunity.”