PetroSA’s plan to refurbish its gas-to-liquids refinery in Mossel Bay in partnership with Russia’s Gazprombank has moved into the feasibility stage, despite widespread criticism and concerns about transparency. The state-owned oil company’s deal with Gazprombank is now big news in Russia, indicating significant international interest in the project.
Civil organization Outa has expressed alarm over the cabinet’s decision to endorse the R3.7 billion investment deal. Wayne Duvenage, CEO of Outa, criticized the decision, suggesting it might be an attempt by the government to secure controversial contracts ahead of the 2024 elections. Duvenage emphasized that the deal appeared rushed and lacked sufficient clarity and rationality.
Tender Process Under Scrutiny
The investigative journalism outfit amaBhungane reported that although 20 companies submitted bids for the PetroSA tender, unusually strict criteria disqualified 19 of them, leaving only Gazprombank’s local subsidiary, GPB Africa & Middle East, in the running. This has raised questions about the integrity of the tender process.
Duvenage highlighted that PetroSA’s bid evaluation committee and its own board had cautioned against awarding the bid to Gazprombank. Despite this, and legal advice suggesting a new tender process, PetroSA proceeded with the award. This decision has been criticized, particularly given Gazprombank’s sanctions related to Russia’s invasion of Ukraine, which could expose South Africa to secondary sanctions or reputational damage.
Economic and Political Implications
PetroSA’s gas-to-liquid fuel refinery, which closed in 2020 due to a lack of feedstock, has the capacity to produce 46,000 barrels of fuel per day. Currently, PetroSA’s revenue largely comes from importing diesel and selling it to Eskom, benefiting from the taxes and fees included in the retail price. Due to Eskom’s increased diesel use to maintain power supply, PetroSA’s turnover surged from R12 billion last year to an estimated R20 billion this year.
Outa is concerned that the investment and equity shareholding by Gazprombank in a South African state-owned asset will enable a foreign state-owned company to profit from South African fuel tax spending and gas sales, with minimal benefits for local citizens. They question the exclusion of other potential options due to the strict and possibly irrational tender criteria, accusing PetroSA of a lack of transparency.
Questions Over Equator Holdings
The involvement of Equator Holdings, PetroSA’s South African partner in the deal, has also been scrutinized. Equator Holdings, led by Lawrence Mulaudzi, a politically connected businessman, was brought into the project shortly after the Gazprombank deal. The Democratic Alliance (DA) has filed a PAIA application requesting the records behind this decision.
Concerns have been raised about Equator Holdings’ capability to finance the project, as it allegedly did not provide the required R22 billion evidence of funding. Additionally, Equator Holdings, with no track record in the gas industry, appears to have bypassed the tender requirement that any successful bidder must be an established player in the industry.
Political Connections and Legal Challenges
Mulaudzi, mentioned extensively in the Mpati Commission report on corruption at the Public Investment Corporation (PIC), has been linked to questionable financial activities involving political figures. Despite this, Mulaudzi asserts that Equator Holdings complied with all PetroSA requirements and is committed to delivering on the project.
As the project moves into the feasibility stage, the debate over its legitimacy and potential impacts continues, highlighting the complex interplay of economic interests, political influence, and governance in South Africa’s energy sector.
