South Africa is forming a new national petroleum company as it uses information technology to streamline services among three subsidiaries of its Central Energy Fund.

The merger which takes effect from 1st April 2021 will birth the new South African National Petroleum Company and was announced by the South African Department of Mineral Resources and Energy (DMRE) and sighted by BusinessDay in a press release distributed by the African Press Organisation on Monday, 8th of March 2021.

The merging subsidiaries are iGas, the official state agency for the development of the hydrocarbon gas industry in Southern Africa; and PetroSA, the national oil company of South Africa mandated to extract natural gas from offshore fields about 89 kilometres from Mossel Bay

A third subsidiary drawn into the merger is the Strategic Fuel Fund Association (SFF), a subsidiary of the Central Energy Fund (CEF), which manages the country’s strategic crude oil stockpile as well as the commercialisation of its substantial crude oil storage facilities in the Western Cape.

This move is driven by the pursuit of implementing a new company that has a streamlined operating model via the development of a shared services system and a common information platform. This is coming a few months after cabinet approval and the confirmation that PetroSA had incurred losses of R20 billion since 2014 that is N533 billion.

Furthermore, the move was prompted by the determination to strengthen PetroSA which had not had a permanent chief executive officer in five years prior to the appointment of Ishmael Poolo as CEO last year and, had become mainly ungainful since its failure to secure gas for the gas-to-liquids refinery project in Mossel Bay.

“South Africa’s energy sector is entering a new dawn,” NJ Ayuk, executive chairman of the African Energy Chamber said. “With gas discoveries off the coast and the announcement of the REIPPP programme bid window 5 and 6 on the horizon, now is the most opportune time for the merger of the CEF subsidiaries.”

The Renewable Energy Independent Power Producer Procurement (REIPPP) programme is a public-procurement programme that allows Independent Power Producers (IPPs) to submit competitive bids to design, develop and operate large-scale renewable energy power plants across South Africa.

REIPPP has been described as an example of a locally designed and implemented programme for enabling the increased supply of renewable energy and combating climate change. It has been termed as “the most successful public-private partnership in Africa in the last 20 years” and is contributing to the country’s target of producing 7000 megawatts (MW) of renewable energy by 2020 and 17,800 MW by 2030.

While the merger deadline has been set, the portfolio committee has expressed reservations to the department’s likelihood of meeting the deadline, considering the existing legislative regime, pending issues raised in the SFF and PetroSA forensic reports, as well as PetroSA’s current insolvency and liquidity challenges, the official press statement on the briefing revealed.

“Of course, it is not an easy task and delays may be anticipated but, this move signals a real change towards a meaningful strategy that will not only be beneficial to the DMRE but to potential investors and local development as well,” Ayuk said.

The African Energy Chamber has welcomed this move and acknowledges that this is yet another step supporting the country’s determination to restart the engines of sustainable growth and the transformation of energy policy and infrastructure.

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