MOSSEL BAY NEWS - The PetroSA Board chairman, Nhlanhla Gumede, has announced to employees that the state-owned enterprise will be reconfigured into three different business units.
The three units will "focus on exploration and production - upstream; refining and manufacturing; and sales and marketing.
The subsidiaries will be ring-fenced, operate autonomously, with the appropriate levels of authority, and governance structures to ensure that they are agile, competitive and create value within the respective segments of the petroleum value chain," Gumede said in a letter to PetroSA employees on 16 July.
A special trading house with the Central Energy Fund (CEF) and other strategic partners is envisaged to pursue entrepreneurial trading.
PetroSA spokesperson Tumoetsile Mogamisi told the Mossel Bay Advertiser: "A review of the PetroSA business model will be done to determine a more viable and optimum business model for PetroSA, particularly given that the indigenous gas feedstock for the GTL Refinery in Mossel Bay is depleting, and the company is importing supplementary condensate feedstock which is priced at a premium to the Brent crude oil price."
Work is under way to determine the optimal model for the repositioning of PetroSA, Gumede said when he also announced that the PetroSA Corporate Plan 2019 - 2023 was approved by CEF, the shareholder, subject to the successful implementation of an emergency plan.
The emergency plan is intended to implement measures to ensure that PetroSA remains solvent and a going concern. It focuses on "reductions in operational and capital expenditure, disposal of non-core assets, and portfolio rationalisation."
Gumede said a concerted effort is to be made to improve efficiencies and the reliability of the GTL Refinery, while processing affordable feedstock that will generate profit margins.
Revenue generating initiatives, including the optimum importation of finished products, are to be aggressively pursued to improve the company's profitability and cash flow position. He added in the letter, of which the Mossel Bay Advertiser was given a copy, that CEF is working closely with PetroSA to ensure the successful implementation of the emergency plan. "A joint project steering committee has been established to ensure the roll-out of the emergency plan a six-month period, starting 1 April 2019."
Mogamisi said the emergency plan implementation has begun. "PetroSA Ghana, a subsidiary which holds PetroSA’s oil producing asset in Ghana has for example declared a dividend to PetroSA of US$20 million at the end of March 2019, and another dividend of US$7 million at end July 2019."
PetroSA continues to face strategic challenges, among others the depleting indigenous gas and condensate feedstock for the GTL Refinery, high costs of supplementary imported condensate, and a high fixed cost structure relative to product throughput.
"These challenges and inefficiencies have led to a precarious financial position and declining cash reserves," Gumede added. He said PetroSA furthermore has to deal with a decommissioning liability that it is not able to fully fund.
"Operational challenges and a 20-day delay of the statutory shutdown in the year ended March 2019 compounded the problem. As a result, PetroSA has to contend with a persistent solvency and going concern threat."
Planned forensic investigations will be conducted within the spirit of continuous improvement, drawing on lessons learned and remedial action to ensure a more commercially sustainable PetroSA. It will furthermore ascertain the veracity of the allegation of mismanagement and maleficence that the PetroSA Board has been alerted to over the past few months. Mogamisi confirmed that the forensic audits have started and are led by CEF.
CEF has appointed Bowmans, Mveza Holdings, Ngwazi Consulting and MNB Chartered Accountants to conduct the forensic audits and investigations.
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