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PetroSA’s Mossel Bay deal with Russian Gazprom now in feasibility stage
Although there has been widespread criticism of PetroSA’s plan to refurbish its Mossel Bay gas refinery, a feasibility study has now started.
Gazprombank. Image: iStock
PetroSA’s deal with Russia’s Gazrpom Bank to refurbish its gas-to-liquids refinery in Mossel Bay has moved into the feasibility stage, according to the state-owned oil company.
The project is moving forward despite wide criticism and is now big news in Russia.
Civil organisation Outa already voiced its alarm at cabinet’s decision to endorse a R3.7 billion investment deal between PetroSA and the Russian-owned financier Gazprombank to resuscitate its gas-to-liquid fuel refinery in Mossel Bay as it seemed to be taken in haste and lacking sufficient transparency, clarity and rationality.
“It smacks of a government that is desperate to secure dubious contracts ahead of the 2024 elections, since there is a strong possibility that those currently in positions of power may no longer be around to approve deals of this nature,” Wayne Duvenage, CEO of Outa, said in December after cabinet announced that it endorsed PetroSA’s decision to sign a deal with Gazprombank.
amaBhungane has reported that although 20 companies submitted bids for the PetroSA tender, unusually strict criteria disqualified 19 of them, leaving only Gazprombank’s local subsidiary, GPB Africa & Middle East.
Duvenage pointed out that we have seen this movie before and it is often a manufactured tactic to shoe-in a preferred bidder for nefarious reasons.
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PetroSA’s awarding of tender to Gazprombank questioned
Despite PetroSA’s bid evaluation committee and its own board warning against awarding the bid to Gazprombank, with PetroSA’s lawyers even suggesting starting the tender process anew, the state-owned entity ignored the advice and awarded the tender to the Russian entity, according to Outa.
“While Gazprombank is under sanctions (related to Russia’s invasion of Ukraine almost two years ago), according to PetroSA the chances of South Africa being hit by secondary sanctions are slim.
Yet a partnership between PetroSA and Gazprombank could very well open South Africa up to the threat of secondary sanctions from the United States, or – in the very least – some reputational damage.”
Duvenage said since the South African Reserve Bank added secondary sanctions to its list of major financial risks facing the country, one would expect the government to proceed with caution.
PetroSA closed its gas-to-liquid fuel refinery in 2020 after it ran out of feedstock. The refinery can produce 46 000 barrels of fuel per day, according to Outa.
PetroSA’s current purpose and the bulk of its revenue exists to buy imported diesel and sell this on to Eskom, profiteering from taxes and fees built into the retail price of diesel.
Due to Eskom’s significantly higher diesel burn rate to keep the lights on over the past year, PetroSA’s turnover increased from R12 billion last year to an estimated R20 billion this year.
OUTA is concerned that an investment and equity shareholding by Gazprombank into a South African state-owned asset will enable a foreign country’s state-owned company to profit from South African citizens’ fuel tax spending, as well as become the beneficiaries of gas sales supplied by them to South Africa.
“This will be a lucrative business with potentially high profiteering that will flow offshore, with zero benefits for the people of the country.
“We want to know what other potential options have been excluded from this transaction due to irrational conditions built into the tender process, which is not being publicised due to PetroSA’s lack of transparency on this transaction.”
Expertise of South African partner Equator Holdings questioned
The South African partner of Gazprombank, Equator Holdings, run by “political operator” Lawrence Mulaudzi, to “explore offshore gas reserves and rebuild critical gas infrastructure”, has also been questioned.
Just hours after signing the deal with Gazprombank, PetroSA officially roped in Mulaudzi’s Equator Holdings by signing a massive tender deal with the politically connected businessman, prompting the Democratic Alliance (DA) to submit a PAIA application to PetroSA, requesting a record of the decision which motivated the awarding of the tender.
The tender deal includes refurbishing the FA offshore platform which connects offshore gas to pipelines that bring it onshore and the gas portion of PetroSA’s Mossel Bay refinery.
“The conduct of the PetroSA executives raises questions about how the tender was awarded when there were obvious glaring inconsistencies showing that Equator Holdings did not qualify,” DA shadow minister of mineral resources and energy, Kevin Mileham, said.
ALSO READ: Flamboyant ‘political operator’ Lawrence Mulaudzi scores Petro SA gas tender…What to know
Does Equator Holdings have money for the project?
Equator Holdings allegedly did not provide evidence that it had the R22 billion needed to finance the deal, which was a prerequisite to winning the contract.
Equator Holdings has no track record in the gas industry, yet somehow side-stepped the requirement that “any successful bidder must be an established player” to be eligible for the tender award.
The DA’s concerns were echoed in an investigative report by amaBhungane, highlighting the fact that the Limpopo businessman and former soccer club owner was mentioned 176 times in the Mpati Commission report into malfeasance and corruption at the Public Investment Corporation (PIC).
The publication also noted that Mulaudzi has been accused of channelling money to a company linked to EFF deputy president Floyd Shivambu, and a trust linked to former ANC treasurer Zweli Mkhize.
However, Mulaudzi claimed in a two-page reply to questions that Equator Holdings complied with PetroSA requirements.
“Although we cannot disclose the details of the transactions as we are bound by legal confidentiality provisions, we can confidently state that Equator Holding complied with PetroSA requirements… We have every intention to deliver, and we will!”
