PetroSA fails to deliver report on project which lost billions

Cape Town – A delegation from the Department of Energy and state-owed entity PetroSA was sent home on Tuesday before they could discuss a watered-down version of a report explaining the losses PetroSA incurred in the 2014/15 financial year.

The delegation, which consisted of acting PetroSA CEO Siphamandla Mthethwa, chairperson Bhekabantu Ngubane and energy director general Thabane Zulu, were supposed to convey the details of a complete forensic report after an investigation into an impairment of about R14bn.

However, the only information members of Parliament’s energy committee received was a copy of a PowerPoint presentation on the matter, reports Fin24 sister publication Netwerk24.

The director general told MPs the forensic report was currently with Energy Minister Tina Joemat-Pettersson and could therefore not be presented to Parliament. However, Democratic Alliance MP Gordon Mackay said Parliament has the right to obtain all the information it requires and that a whitewashed report wouldn’t do.

Pieter van Dalen, also from the DA, said he wanted to see a detailed report of how the R14bn had been spent.

The chairperson of the Portfolio Committee on Energy, Fikile Majola, insisted that the report be presented on November 1 and that the entire PetroSA board, as well as Joemat-Pettersson, be present.

The impairment of R14.5bn in the previous financial year, which led to PetroSA’s losses, was ascribed to poor management of Project Ikhwezi. This entails the finding of new gas deposits under the sea off Mossel Bay to feed PetroSA’s Mossel Bay gas-to-liquids refinery.

Three out of the five drilling wells yielded a modest 25 billion cubic feet of gas out of an expected 242bn cubic feet. In the mid-2000s PetroSA still had a cash balance in excess of R10bn, but the project has since put its balance sheet under considerable pressure – to such an extent that the Mossel Bay refinery risks closure in March next year.

Project Ikhwezi was expected to deliver the first gas in March 2013, which would have extended the refinery’s lifespan to 2019. The first deposits however, were only available some 21 months later by December 2014. A number of top executives were fired due to the botched project.

The situation was made worse by the drop in oil prices since 2014, as well as higher capital costs.

According to the report, Project Ikhwezi wasn’t subjected to the required due diligence and corporate management processes because of the urgency to deliver gas to the Mossel Bay refinery.

Risk management was inadequate, the board wasn’t notified in time of various problems, and there were delays in the delivery of equipment. In addition, a number of contractors were changed.  

* For this story and more business news in Afrikaans, visit Netwerk24.