South Africa is looking to Russia for help to power up its ailing energy landscape. The country’s Cabinet has formally endorsed state-owned oil and gas company, PetroSA’s strategic partnership with Russia’s Gazprombank, facilitated through its local subsidiary Gazprombank Africa.
This collaboration aims to reinstate the gas-to-liquids refinery in Mossel Bay, a pivotal component of PetroSA’s comprehensive turnaround strategy.
Petro SA
PetroSA actively sought a partner to provide technical and financial support for the complete operational restoration of the Mossel Bay GTL refinery. A report by South African investigative journalism centre, AmaBhungane, indicated that the deal’s estimated value is R3.7 billion.
Minister in the Presidency Khumbudzo Ntshavheni announced on Monday that the Cabinet had approved PetroSA’s recommendation to choose Gazprombank Africa as the investment partner for the refinery’s restart.
This endorsement, however, remains contingent on the final investment decision, which a joint bankable business case and the conclusive definition of terms and conditions will guide. These critical details are expected to be finalised by April 2024.
Gazprombank is a Russian financial institution that currently operates under US sanctions in response to Russia’s invasion of Ukraine. Ntshavheni defended the decision to engage with Gazprombank, emphasising its potential to yield substantial benefits for South Africa, including a potential reduction in fuel prices.
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Ntshavheni explained that a comprehensive risk assessment had been conducted because the deal might result in secondary sanctions for the country. She highlighted that South Africa is not the first country to engage with Gazprombank and exemptions to US sanctions have been considered in the past.
PetroSA initially explored a state-to-state partnership when going out to tender, and Gazprombank Africa, owned by the Russian Federation, emerged as a strategic choice.
Crucially, Minister Ntshavheni clarified that the cabinet was not directly involved in the procurement process but was briefed during a special meeting held last Friday.
Expressing confidence in PetroSA’s due diligence, she stated that the company followed rigorous processes to ensure the partnership withstands scrutiny.
Moreover, Minister Ntshavheni emphasised that South Africa’s relationship with the Russian Federation, driven by their partnership in BRICS, remains steadfast. The country remains committed to increasing trade and investment relations within BRICS while maintaining relationships with other nations beyond the BRICS consortium.
The anticipated reinstatement of the Mossel Bay refinery carries substantial economic significance, potentially retaining 2,000 direct site jobs and offering an additional 4,000 fixed-term employment opportunities during the construction phase, further reinforcing the strategic importance of this collaborative initiative.
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