The South African government has endorsed state-owned oil and gas company PetroSA’s decision to collaborate with Russia’s finance institution, GazpromBank, to revive the gas-to-liquids (GTL) project in Mossel Bay, Western Cape.

Since encountering stock feed challenges in 2020, GTL has not been operating at its full production capacity.

Khumbudzo Ntshavheni, the Minister in the Presidency, said they were informed about the decision during a special Cabinet meeting held on Friday, December 8, 2023.

Ntshavheni provided journalists with a comprehensive update during a post-Cabinet media briefing on Monday, December 11, 2023.

“Cabinet received an update on progress with the process to reinstate the Mossel Bay GTL refinery as one of the critical components of PetroSA’s turnaround strategy. Cabinet was updated about the process followed by the Central Energy Fund to source partners with the requisite technical and financial resources to support PetroSA in bringing the refinery back to full operation. The preferred partner would share in the risk and rewards of reinstatement of the refinery,” Ntshavheni said. 

“The refinery reinstatement has a potential to retain at least 2000 direct site jobs, with additional potential fixed term employment opportunities for 4000 jobs during the construction phase. Cabinet endorsed PetroSA’s recommendation to select GazpromBank Africa as the investment partner for the reinstatement of the plant and production. Cabinet noted that this selection of GazpromBank is still dependent on the final investment decision that will be informed by a joint bankable business case, as well as all the terms and conditions that are anticipated to be finalized in April 2024,” she added. 

During the press conference, Ntshaveni clarified that PetroSA, not the cabinet, selected Gazprombank.

She added that South Africa was not the first country to work with Gazprombank.

“We need to explain that South Africa is not the first country to have ties with Gazprombank or with a Russian company. India procures oil from Russia, and they sell it. The European Union and the United States of America have ties with Russia. What the cabinet considered fundamental is the investment that will yield results for this country, but it will also be beneficial to lowering the price of fuel in the country,” said Ntshaveni.

The Land Party has welcomed the government’s decision to work with GazpromBank.

“The Land Party, in its memorandum of March 2022, states that its second demand is for South Africa and Russia to trade openly without fear of being intimidated by external forces. We strongly believe that this is the first step in the right direction. Gazprom will assist South Africa in becoming economically sustainable, reducing unemployment, solving high fuel prices, and becoming energy self-sufficient,” said the party’s spokesperson Avela Sithonga.

PetroSA, also known as the Petroleum Oil and Gas Corporation of South Africa, is a national oil company established in 2002 to ensure a stable energy supply and promote the overall goals of the South African petroleum industry for the country’s benefit.

The company is a subsidiary of the Central Energy Fund, which is wholly owned by the State and operates under the supervision of the Department of Minerals and Energy.

PetroSA aims to be the foremost provider of sustainable, affordable, and high-quality hydrocarbon-based energy in South Africa.

The national hydrocarbon endowment is also expected to be unlocked and utilized to generate commercial value. Additionally, it aims to facilitate and support competitive and efficient energy markets in South Africa, while transitioning to low-carbon energy sources and ensuring a secure energy supply.