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RYK VAN NIEKERK: Good morning and welcome to this particular Moneyweb podcast. My title is Ryk van Niekerk.
PetroSA (Petroleum Agency South Africa) is South Africa’s state-owned oil firm, tasked with a big selection of tasks to assist guarantee power safety within the nation. Over the previous few years the corporate has been within the information for the improper causes, principally associated to corruption and the corporate struggling enormous losses. PetroSA additionally not produces liquefied pure gasoline [LNG] since feedstock to its gas-to-liquids [GTL] refinery in Mossel Bay ran out on the finish of 2020. This is a matter as a result of PetroSA’s gas-to-liquids refinery stays the third-largest gas-to-liquids refinery worldwide.
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Sandisiwe Ncemane is the performing CEO of PetroSA. She was appointed to this position late final 12 months. Sandisiwe, thanks a lot for becoming a member of me at present. Let’s speak about PetroSA for a second. What is the standing of the corporate? Are you producing any gasoline? What are your major operational successes in the mean time?
SANDISIWE NCEMANE: Good morning, Ryk. Thanks for having me in your present. My title is Sandisiwe Ncemane and I’m completely satisfied for you to name me Sandi. I positively need to share a few of the highlights. But I believe as we go into that permit me additionally point out that, sure, you might be right that PetroSA over the previous couple of years has had to overcome some key challenges, anchored on the depleting feedstock to its gas-to-liquids plant in Mossel Bay. That has required that we take a look at interventions from a number of views.
I believe it’s additionally opportune for me to share that final week one of many key milestones that begins speaking to how we’re resuscitating this explicit plant and the way it ties into our long-term technique, I believe began to have its anchors available in the market by the request for proposals that have been despatched out into the trade, requesting potential companions and funders to reply, indicating their curiosity.
That actually entails a possibility to reinstate the gas-to-liquids plant in Mossel Bay. Central to that can also be making certain that we do have a steady feedstock provide into that specific facility.
Now, how does this discuss to our long-term technique?
I’d like to maybe paint the image that additionally provides you a sense of what we’re prioritising within the extra speedy time period. So for PetroSA our long-term technique actually begins to discuss to the interval 2027 onwards, the place for us gasoline is among the many crucial feedstocks, not solely within the context of reinstating our refinery but additionally by way of contribution to energy technology, in addition to stimulating varied industries with the availability of pure gasoline.
So an built-in gasoline financial system for us is a part of what our outlook is by way of contributing to safety of provide and in addition delivering to the built-in power planning of the nation.
I spoke to that by way of it being our long-term technique. Enablers in fact of that on the time once we are in a position to safe that feedstock [are that] we have now a captive utilisation or offtake within the type of the refinery that might be going by the restatement. As you might be conscious, that refinery within the present capability [has] a functionality of 46 000 barrels per day that it will probably generate. It’s primarily based on a three-train system.
RYK VAN NIEKERK: That 46 000 barrels per day – if the plant is working at full capability, how a lot of the gasoline can that plant produce relative to what we use on daily basis within the nation?
SANDISIWE NCEMANE: Well, it’s additionally linked to the mixture of … merchandise [is] that you’d primarily be producing. So let me offer you a view of what usually we might have produced within the interval, say, pre-2018, the place one of many key merchandise we have been producing, over and above the diesel, your petrol and a little bit of, say, paraffin, [was] specialised petrochemical merchandise, which in themselves had truly anchored themselves by markets internationally, and significantly in Europe the place we had established a particular car, the Europe BV car, which we had utilised to commerce in that specific area. That ought to offer you a sense of the myriad merchandise that we then supplied by that refinery.
But, as I’m saying, what the outlook is – further to that refinery with the provision of gasoline – what we might need to even be contributing is to the power-generation solution.
In the extra speedy or, shall I say, short- to medium time period, we’re seeing a possibility for PetroSA to try this by the tail gasoline that we’re nonetheless receiving from our offshore fields. As you talked about, Ryk, over time we’ve seen the depleting assets or reserves from that specific subject. However, from what our final reserves audit indicated, we nonetheless have capability to the tune of about 45 to 50 million stuff [barrels?], if you’ll, coming by that specific facility that we will then use to drive energy technology. We name that gasoline ‘tail gas’.
And from a few of the indicator research we’re doing, we’re seeing a capability of shut to 200MW of energy that may be generated utilising that tail gasoline.
Why I’m highlighting it’s because there’s already improvement work that we’re doing that might primarily allow this. So not solely have we received entry to the gasoline – and from the volumes we’re speaking to we may have not less than three years’ provision to drive that specific solution – we even have undertaken a lot of the event work, together with beginning work round a few of the permits. An environmental affect evaluation is without doubt one of the enablers that we’d like to have in place, and that work has been triggered. We’ve additionally had a workforce that’s led work across the grid capability evaluation. So, when you generate the ability, how do you evacuate it? That’s crucial. And in fact from the business aspect it could be necessary to then safe the offtake [agreements].
I believe on the again of the place we’re positioned, one of many key offtakers whom we have now been participating at completely different ranges could be Eskom. You are conscious that additionally they have their very own open-cycle gasoline turbine in Mossel Bay in addition to Cape Town, and Gourikwa in Mossel Bay specifically is adjoining to our services. So even with the provision of gasoline, there’s a possibility for them to convert that specific facility – to have a hybrid solution, if they’ll … gasoline.
RYK VAN NIEKERK: We’ll discuss concerning the solution for our power, the electricity issues, in a minute. I simply need to return to the plant in Mossel Bay. Is it standing idle in the mean time, ready for gasoline? And, if that’s the case, when do you suppose you’ll have the ability to get a constant, ample provide of pure gasoline to get that plant again to full manufacturing?
SANDISIWE NCEMANE: In December ’20 the plant went offline, once more linked to the provision of the feedstock. One of the crucial mass tales [that] I’m sharing [is] that we have now now triggered the method which, one, would reinstate the technical integrity of the ability, by the partnership strategy that we’ve gone out into the market to pursue.
Secondly, that might additionally help us to discover essentially the most optimum feedstock solution. I’ve talked about what the long-term solution would primarily be anchored round, which is gasoline, indigenous gasoline. If you take a look at that RFP [request for proposals], it permits alternatives to take a look at a vary of feedstock that may very well be used within the extra medium time period, which embody LNG, which would come with as I discussed the tail gasoline, which might additionally embody the potential choice of even liquid feedstock.
You are conscious that the plant is configured such that it takes each gasoline and condensate to produce the total capability of the refinery.
RYK VAN NIEKERK: The current discoveries of gasoline offshore or shut to Mossel Bay – I believe the Brulpadda improvement is without doubt one of the huge ones, one of many largest finds in current occasions close to South Africa. When do you foresee receiving gasoline from that improvement and different offshore developments shut to Mossel Bay?
SANDISIWE NCEMANE: When I discuss to the long-term technique, which is [for] 2027 onwards, it’s fairly linked to that specific engagement as effectively. So that specific alternative is developed by the TotalEnergies Consortium [which] is the developer for that block 11/12. You are conscious that they have already got secured the exploration rights, and final 12 months they triggered the appliance course of for the manufacturing rights. Of course it’s going to learn by the purpose at which they safe an funding determination as that consortium. However, as indicated in a few of the media engagement, they predict that 2027 or thereabout may very well be a good milestone for us to begin to obtain that feedstock. So our [responsibility] is to be certain that the market that might be consuming that gasoline is onstream to have the ability to create that worth. And the work round reinstating the GTL is actually to additionally be certain that we’re certainly in a place to obtain that gasoline.
RYK VAN NIEKERK: But that’s nonetheless a few years away.
SANDISIWE NCEMANE: That is a few years away on the again of the work that’s actually entailed in any exploration and manufacturing worth chain, and the timelines related to it. I believe, in fact, this explicit entity – I’m referring to the Total Consortium – have been fairly aggressive in how they’re creating this plant from the purpose at which they made the discoveries, after which now [are] pursuing the manufacturing proper. I belief that we’ll then see how that timeline unfolds.
However, I believe there are seemingly to be different developments that too may contribute to our having the ability to discuss to a steady provide of gasoline, of feedstock by the interval 2027 on this. In the extra medium time period, if I may say, I believe the choices which are outlined within the RFP may presumably additionally current viable options by way of the reinstatement of the refinery in itself.
I believe what I additionally need to ensure that we’re speaking to is a view of an built-in solution on the again of feedstock, and significantly gasoline feedstock, as a result of I believe it’s a dialog in a approach that we’d have been [as] a single-project view. Once we begin to take a look at it in a consolidated method, I believe it begins to additionally discuss to a crucial market that makes these initiatives, I believe for the builders, extra engaging…
RYK VAN NIEKERK: You referred earlier to the RFT [request for tenders] you issued to work with non-public sector companions. Just inform us concerning the technique there. Is it an outsourcing of a few of the features? I do know some individuals would even recommend that it’s a privatisation of operational tasks. What would the longer term construction of such relationships be?
SANDISIWE NCEMANE: I believe the way in which it’s structured actually is opening up the dialogue for varied modalities. What I can point out to you is that PetroSA will stay with a share within the solution. I believe that’s a crucial side to be mindful by way of the worth that we’re additionally bringing into making certain that we make this work. Remember, from a state perspective we nonetheless maintain a key mandate from a safety of provide perspective, and I believe that can stay central in making certain that this solution is viable and implementable.
What can also be an necessary side I’d like to share once we discuss concerning the reinstatement of the GTL is that this strategy we’re taking is we will get partnerships, and partnerships additionally from a government-to-government degree…. We are fairly eager on participating events which have a assist linked to a authorities or a nation related to them. We additionally respect that there are non-public gamers that include that sort of configuration, so we’re eager on seeing the responses that we’ll be getting.
As you take a look at that, you will note that there are actually two components to this explicit implementation. There’s a component that claims we’re searching for a associate to co-invest within the reinstatement, in addition to a component that claims how optimally we [might] fund this explicit work. So that’s what you see in that specific alternative.
RYK VAN NIEKERK: You’ve stated PetroSA will retain or maintain a stake in these ventures. Does that imply the companions or the private-sector individuals would have an fairness stake in such initiatives, their very own fairness stake?
SANDISIWE NCEMANE: We are fairly eager to see how these choices are offered within the responses, and the varied iterations that might come from the respondents by way of how we may make this explicit solution work.
So no, we’re not trying to outsource to a service supplier. [We’d prefer] to go into a partnership that might permit us to ship worth by this solution.
RYK VAN NIEKERK: Then gasoline appears to be the power supply that’s not getting the airtime I believe it ought to have, or ought to get as one of many key options to our electricity issues. Earlier you stated possibly there are plans to generate round 200MW of electricity with using gasoline. First of all, what do you suppose the position or the potential position for gasoline is in our power combine, and do you suppose it will likely be in a position to play a significant position – not solely by sensible and logistics phrases, but additionally due to some resistance from environmental groupings?
SANDISIWE NCEMANE: Our one marker is to affirm that gasoline positively has a strategic position within the South African power solution. I believe that can also be evident once you take a look at the Integrated Resource Plan [IRP] that we’ve seen in 2020/2019. That does make provision for gasoline a key half in energy technology. What I believe can also be attention-grabbing is, once we discuss [about] gasoline and pure gasoline, what it doubtlessly appears like for South Africa, a South Africa within the context of the place it sits in southern Africa with the potential unlocked already, as we see by the experiences in Mozambique and the developments which are coming about on the West Coast, if you happen to take a look at South Africa going into Namibia. I believe that’s an necessary component.
And in fact the assets that we doubtlessly have [on] our personal shores – we’ve already talked about Block 11/12, the place Total is doing a little work – there’s already proof that there are robust assets within the nation.
Why I say it’s attention-grabbing is that the gasoline dialog for me then says we speak about gasoline from an indigenous perspective – what we will get from our personal reserves, each offshore and onshore. But I do know this, you might be proper, in an environmental dialogue it turns into one the place there are nice sensitivities. But I believe the purpose is we have now prospects in-country. We’ve received the neighbouring states and the reserves which are already unlocked in a few of these. You’ll do not forget that PetroSA, being a part of the CEF (Central Energy Fund) group, additionally by certainly one of its sister subsidiaries would have an curiosity in making certain that we’re optimally utilising the Rompco pipeline from Mozambique into South Africa, the place iGas presently has a 40% shareholding.
I believe moreover that additionally begins to speak about what pure gasoline imported by Mozambique doubtlessly means as we take a look at that Mpumalanga area and the prospects round energy technology utilising gasoline because the feedstock.
Moving on from there, we then have the coastal alternatives over [recent] years. You might have learn that the deep-water ports themselves current a possibility the place imported liquefied pure gasoline may doubtlessly be utilised as effectively to drive energy technology, but additionally to develop into a gasoline provide to set off trade. Once once more it goes again to the purpose I discuss round gasoline being an built-in solution or built-in gasoline financial system that we’d like to be constructing.
For me, I believe within the occasion of PetroSA, the place we’re positioned in Mossel Bay, already having had the expertise of manufacturing a few of the offshore blocks and fields to produce gasoline, I believe we will display some key learnings there – not simply from a technical perspective, however from a neighborhood/social/financial perspective what meaning for that specific area. And secondly what extra gasoline would successfully unlock – once more not simply in that specific a part of the nation however even [more broadly].
So I’m saying once we speak about gasoline let’s take a look at it by way of the place the gasoline sources may very well be within the South African context. We may import it, import it from neighbouring nations, import it as liquefied pure gasoline, utilizing the port infrastructure, as effectively its Total or indigenous gasoline. I believe it’s in the end a part of that specific cake for the nation.
RYK VAN NIEKERK: Just for curiosity’s sake, what do you consider potential cell options like a energy ship which might deploy a purposeful energy plant utilising gasoline as a gasoline supply – effectively, in lower than two years? South Africa so desperately wants electricity. Do you suppose that’s a solution?
SANDISIWE NCEMANE: Yes, I believe as a nation we actually want to discover all choices and take a look at, as you say, possibly within the speedy time period, what the solution supplies as worth, after which the way it integrates into the medium-term options that we’ve outlined in our IRPs, that we’ve outlined as we take a look at unlocking our personal indigenous [gas that we’ve] outlined within the regional, and I’m speaking concerning the seismic regional gasoline plan. I believe there’s varied work that’s fairly wealthy, in addition to the South African Gas Master Plan. There are plans which are actually wealthy, that I believe present options. Again for me how do you line that up?
So sure, cell options. And, by the way in which, I discussed the tail gasoline to energy, and a part of the choices by way of the power-generating block is to utilise a cell technology solution, in fact it as a extra short-to-medium time period solution that might combine into a longer-term power-generation solution.
And I believe there are answers that we may presumably take a look at. How do you then make [them] possible? How do you construction [them] in order that the builders are in a position to safe the related funding, in addition to offtake and the mandatory enablers. So for me the timing can also be linked to our having the ability to speed up and get extra efficiencies in securing a few of the environmental authorisations and permits, the technology licence, and so forth that might be crucial in realising these options.
RYK VAN NIEKERK: Yes, and I believe additionally pricing might be completely crucial. Are you concerned in potential improvement of shale gasoline within the Karoo?
SANDISIWE NCEMANE: Yes. Again, I’m going to reply to this one within the context of the CEF Group, the place the Petroleum Agency of South Africa is without doubt one of the sister firms. They are the regulator for the oil and gasoline exploration manufacturing, however they’re additionally taking part in a crucial position in constructing consciousness across the oil and gasoline sector. They’ve been doing in depth research round shale gasoline and understanding the baseline by way of a few of the assets, together with water in that area. I believe it’s necessary work that has been finished. I believe our having the ability to unlock the potential of oil and gasoline by what is obtainable within the Karoo area and different areas within the nation is necessary.
Once once more, we’d like to ensure that the approaches we take are sustainable but additionally built-in insofar because the environmental concerns that want to be utilized. I believe the truth that Pasa, among the many key events [is] concerned on this worth chain doing a few of the evaluation and baseline research, is a demonstration of additionally the significance and dedication to making certain that the work is completed in an environmentally sustainable style.
RYK VAN NIEKERK: It appears actually constructive. It appears you have got a strategic plan going ahead. The proof might be within the pudding, so to converse. Are you assured you’ll have the ability to execute these plans and contribute in direction of power safety in South Africa, given the observe report of PetroSA over the previous decade or so?
SANDISIWE NCEMANE: You are fairly frank. I like that. It’s necessary. And for me to be fairly pragmatic is [that] typically we’d like to begin so as to get to a level the place we will display the plan.
So I’ve shared with you what we’re planning in the long run and what we’re doing within the medium time period. What it has required for us, although, is to say ‘Immediately, PetroSA, what do you do to ensure that financially you are stable as a country, but also that you start to build your capacity, building towards being able to deliver on these integrated gas solutions?’ It has put us at a level the place we’re actually bolstering aggressive development within the downstream enterprise by our buying and selling and advertising arm.
Now, that is a area the place the likes of Eskom turns into one of many crucial prospects whom we’re servicing instantly by the availability of your petroleum merchandise, together with diesel – which is utilised within the open-cycle gasoline generators for energy technology – amongst different merchandise that we’re going to be making accessible to the likes of Eskom and different trade gamers, together with heavy gasoline oils and different black oils procurement.
So I’ve received a buying and selling workforce that’s actually how finest they execute their buying and selling technique within the context of the worldwide panorama, in addition to the South African panorama that we’re working in.
RYK VAN NIEKERK: You are nonetheless in an performing position. Government has promised to appoint a everlasting CEO of PetroSA. Do you recognize when it will occur?
SANDISIWE NCEMANE: We might be guided and once more… adopted by the board of the organisation in addition to our shareholder CEF. And I believe in the end the timelines related to it will then be communicated.
RYK VAN NIEKERK: That was Sandisiwe Ncemane. She’s the performing CEO of PetroSA.
