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President Cyril Ramaphosa has announced the formation of the South African National Petroleum Company (SANPC), a new state-owned entity set to play a pivotal role in the country’s energy sector. The SANPC is the result of a merger between three subsidiaries of the Central Energy Fund (CEF): iGas, PetroSA, and the Strategic Fuel Fund (SFF).
This new entity aims to ensure South Africa’s energy security, promote new technologies, develop critical infrastructure, foster strategic partnerships, and drive social and economic development.
Energy Sector Transformation
The SANPC will be responsible for overseeing the strategic planning, coordination, and governance of the nation’s petroleum resources, positioning itself as a key player in supporting the country’s development and economic growth. It has been granted approval to operate under section 51(g)(h) of the Public Finance Management Act of 1999.
The formation of the SANPC follows Ramaphosa’s 2020 State of the Nation Address, in which he committed to “rationalize” state-owned enterprises to support national growth. In June 2020, Cabinet approved the Department of Mineral Resources and Energy’s (DMRE) plan to merge iGas, PetroSA, and the Strategic Fuel Fund into one entity.
Merging Challenges and Opportunities
In a statement released on Wednesday, the SANPC explained that only the financially viable parts of the merging entities will be incorporated into the new company. “Out of the three merging entities, only iGas and SFF are financially viable. Regarding PetroSA, only the trading division and the Ghana asset will be included in the SANPC.”
The remaining parts of PetroSA will remain as legacy assets, which require further work before being transferred to the SANPC. In the interim, the SANPC will function as a subsidiary of the CEF Group until the National Petroleum Bill is enacted.
Lease and Assignment Model
To facilitate the transition, the SANPC will use a Lease and Assignment model, under which select assets from the merging entities will be leased to the new company. This approach allows SANPC to avoid inheriting PetroSA’s operational inefficiencies and liabilities while enabling it to secure funding and position itself for long-term success.
“This model improves the financial risk profile of SANPC, helping it secure funding and manage PetroSA’s legacy issues, including decommissioning liabilities and challenges with its Gas-to-Liquid Refinery,” the statement read.
Once the issues surrounding PetroSA’s legacy assets are resolved, they will be transferred to SANPC.
R95 Billion Market Opportunity
The company is confident that it can capitalize on a R95 billion market opportunity, leveraging the combined strengths of iGas, PetroSA, and the SFF.
“With robust financial backing and strong stakeholder support, SANPC is poised to become a major player in South Africa’s energy sector, ensuring energy security, driving technological advancements, and promoting infrastructure development,” the company added.
This move marks a significant step in South Africa’s energy transformation, with the SANPC expected to be a cornerstone of the country’s future energy security and economic development.