New SA National Petroleum Company gets Compcom nod

20 Sep 2024

The Competition Commission has granted approval for the Central Energy Fund (CEF) to acquire key assets, including those from the Sapref Refinery, following the policy statement by President Cyril Ramaphosa that resulted in the formation of the South African National Petroleum Company (SANPC). SANPC was formed through a merger of the CEF subsidiaries, iGas, PetroSA and the Strategic Fuel Fund, which was requested by the DMRE in 2020.

The newly formed SANPC will operate as a subsidiary of the CEF

CEF’s acquisition of the dormant Sapref Refinery in Durban, which was jointly operated by Shell Downstream South Africa (SDSA) and BP Southern Africa (bpSA), is the next step in the consolidation process where the remaining State operated legacy petroleum assets are transferred into the SANPC.

The refinery, once a major player in the production of petrol, diesel, jet fuel, and other petroleum products, ceased operations in 2020.

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The acquisition includes a condition that all Sapref employees be transferred to the new entity under equivalent employment terms.

This reshaping of the energy landscape was announced by President Cyril Ramaphosa in his 2020 State of the Nation Address, is part of a broader effort to rationalise state-owned enterprises and shore up the country’s energy security.

Energy strategy

SANPC will manage and oversee South Africa’s petroleum resources and is also expected to streamline development, which the president believes will contribute to job creation and economic growth.

Historically, PetroSA has faced operational challenges, particularly with its Gas-to-Liquids refinery in Mossel Bay, which has been dormant since 2020 due to feedstock issues.

SANPC offers a fresh start, consolidating the financially viable divisions of CEF’s subsidiaries under a unified banner.

The rationalisation 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.

The road ahead

As the SANPC begins operations, it will rely on a lease and assignment model, which allows for selective leasing of assets from the merging entities.

This model is designed to minimise financial risk while capitalising on PetroSA’s viable divisions, like its trading operations and international assets.

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.

With the Competition Commission’s approval, SANPC is should be able to take a leadership role in South Africa’s energy future and limit the extent of foreign influence on the local refinery market.

By consolidating resources and expertise, the new company is set to seize on the R95bn refinery market opportunity.