The South African Revenue Service has moved to seize PetroSA’s Mossel Bay refinery amid mounting concerns that the state-owned oil and gas company cannot afford to settle its R4.5 billion tax liability, casting a shadow over the plant’s future prospects and raising questions about the company’s financial viability.
The move comes three months after PetroSA cancelled a deal with Russia’s Gazprombank to help restart the Mossel Bay refinery, which was forced to stop operations at its gas-to-liquids facility in 2020 due to depleted offshore gas reserves. PetroSA executives confirmed to the portfolio committee on mineral and petroleum resources last week that the company is unable to settle the massive debt.
A senior PetroSA manager confirmed that a SARS representative had recently travelled to the firm’s mothballed West Coast gas-to-liquid refinery with a view to attaching assets. The company told the committee it has R20 billion in liabilities with only R13 billion in assets and continues to lose money each year, deepening its financial crisis.
DA spokesperson James Lorimer said the group’s inability to pay off the R4.5 billion debt raises serious concerns about its viability as a partner in the Mossel Bay project. “The only way PetroSA can start earning significant revenue is to restart the gas-to-liquids plant at Mossel Bay,” he said. “To do so it would need a private sector partner. One is unlikely to be found with PetroSA being an unviable partner.”
According to Lorimer, if PetroSA were a private company, it would be considered to be trading recklessly, and its directors would be liable for prosecution. However, its position as a subsidiary of the Central Energy Fund ensures that it is allowed to continue accumulating debts.
With PetroSA’s liquidity compromised, a cloud of uncertainty hangs over the prospects and timeline of the Mossel Bay plant’s reopening, which had been set for April next year. The operation was previously capable of processing up to 45,000 barrels a day before being put on care and maintenance in 2020.
In December 2023, the cabinet announced that privately owned Russian bank Gazprombank had been selected to refurbish the refinery at a cost of R3.8 billion. Less than a year later, the United States announced sanctions against the bank and its six foreign subsidiaries, including Gazprombank Africa, eventually leading to PetroSA withdrawing from the partnership in September.
The controversy featuring Gazprombank was only the latest in a series that have tainted the national oil company’s public image in recent years. In 2016, PetroSA reported a R14.5 billion loss, the biggest by any state-owned enterprise at the time, blamed largely on a failed drilling project that produced only a tenth of the promised gas.
Source: businessday.co.za