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PetroSA pushes for R3.7bn deal with Russia’s Gazprombank despite concerns over partnership

PetroSA pushes for R3.7bn deal with Russia’s Gazprombank despite concerns over partnership
Illustrative image: (Wikimedia | Waldo Swiegers / Bloomberg | Andrey Rudakov/Bloomberg)

Russia’s Gazprombank – currently under US sanctions – is PetroSA’s preferred choice to refurbish the gas-to-liquids refinery in Mossel Bay, at a cost of R3.7-billion.

The state-owned Petroleum Oil and Gas Corporation of South Africa (PetroSA) wants to partner with Russia’s Gazprombank to restart the gas-to-liquids refinery in Mossel Bay.

PetroSA advertised a tender in January looking for a partner willing to invest at least $200-million (R3.7-billion) to refurbish the refinery.  

Twenty companies submitted bids, but the unusually strict technical criteria meant that 19 of the 20 were eliminated, leaving Gazprombank’s local subsidiary, GPB Africa & Middle East, as the only qualifying bid.

However, leaked documents, seen by amaBhungane, reveal that the PetroSA bid evaluation committee and board raised concerns about partnering with Gazprombank, which is under US sanctions, and advised PetroSA to enter into negotiations with other bidders, including Azerbaijan’s state oil company, Socar, and China’s state-owned energy infrastructure company, CMEC. 

PetroSA pushed back with a legal opinion from Ledwaba Mazwai Attorneys that said it had “no right to entertain other offers” aside from the Russians’. Although the lawyers advised PetroSA to cancel the tender and start again, it appears to have ignored this advice.

Instead, PetroSA presented a second legal opinion from Centurion Law Group, a boutique law firm run by fossil fuel lobbyist NJ Ayuk, arguing that the risk of South Africa facing sanctions over its relationship with Russia was low.

This contradicts the Reserve Bank’s warning back in May after it added “secondary sanctions” to its list of nine major financial risks facing the country.

“[T]he possible imposition of secondary sanctions on South Africa … could lead to financial instability in South Africa,” the Reserve Bank warned. 

“Should this risk materialise, the South African financial system will not be able to function if it is not able to make international payments in USD…”

A source close to the bidding process told amaBhungane that PetroSA plans to award the contract to Gazprombank anyway.

We sent three pages of questions to PetroSA two weeks ago. On Friday, spokesperson Nonny Mashika provided a one-line response: “PetroSA is currently undergoing Stakeholder Engagements with various governance structures and therefore cannot comment on the matter.”

Bleeding Eskom

The gas-to-liquids refinery is a critical part of energy minister Gwede Mantashe’s plan to jumpstart the gas industry and resuscitate PetroSA.

Built in 1989 by PetroSA’s predecessor Mossgas, the refinery was intended to help the apartheid government bypass the United Nations oil embargo. Normally, petrol and diesel are made by distilling crude oil. The Fischer-Tropsch method used in the gas-to-liquids refinery instead produces synthetic petrol and diesel from natural gas and gas condensate.

When running, it can process 46,000 barrels of fuel per day, but the refinery has been “parked” since December 2020 when it ran out of feedstock.

For now, PetroSA buys imported diesel and sells it on to Eskom at a profit. But the margins on trading diesel are small and PetroSA’s long-term plans rely on rebuilding its in-house refining capacity.

If PetroSA’s deal with Gazprombank goes ahead, the Russian company will not only invest R3.7-billion and be responsible for refurbishing the refinery but also provide PetroSA with gas condensate – at least until domestic natural gas becomes available. 

In exchange, Gazprombank will get a share of the profits.

Any diesel that the refurbished gas-to-liquids refinery produces is likely to be sold to Eskom to burn in its open-cycle gas turbines. 

Load shedding has provided a lifeline to PetroSA and helped grow its turnover from R12-billion last year to an estimated R20-billion this year. For a partner like Gazprombank, this could be a goldmine.

Unsolicited bids

The request for proposals (RFP) raised eyebrows when it was issued in January. 

It revealed that PetroSA had already received unsolicited bids and suggested that these so closely matched the criteria for the tender that bidders were told: “Entities/applicants who previously submitted unsolicited proposals in the last 6 months need not resubmit.”

In fact, three state-owned entities had shown interest: Russia’s Gazprombank, Azerbaijan’s Socar and China’s CMEC. But the only detailed proposal had come from Gazprombank.

The RFP also made clear that PetroSA wanted to partner with a state-owned entity from an oil and gas-producing nation. A bidder that was majority state-owned would score 10 points, while a company that was minority state-owned or state-supported would only score 5. Private companies would get zero points.

Although state ownership only accounted for 10 out of 100 points, an unusually high technical threshold of 80% meant bidders could only afford to lose 20 points overall before they would be eliminated.

The only company that scored 80 points was Gazprombank’s local subsidiary, GPB Africa. BB Energy Gulf, an energy trader based in the UAE, came a close second with 75 points but did not qualify.

We asked PetroSA whether the average person would not reasonably conclude that the RFP had been tailored to suit the unsolicited Russian bid. But this was one of the questions it chose not to answer. 

Spooked by the Russians

Gazprombank is a shapeshifter: the de facto financial arm of Russia’s state-owned gas company Gazprom, it is also technically a privately owned bank.

This ambiguity allows Gazprombank to play at being a state-owned company one day and an independent bank the next. 

The bid evaluation team, for instance, appears to have treated Gazprombank as a stand-in for the state-owned Gazprom: “Gazprom Africa is technically and strategically a good fit for PetroSA. This is due to their large oil and gas reserves, financial reserves and the fact that they meet the stated objectives of the RFP in that they were state-owned,” an extract from the bid evaluation committee report, quoted in the Ledwaba Mazwai legal opinion, reads.

Gazprombank has so far avoided the strictest sanctions imposed on Russia. 

While eight Russian banks have lost their access to the SWIFT system – blocking all transactions in US dollars – Gazprombank remains open for business.

Part of this has to do with the European Union’s continued dependence on Russian gas and on Gazprombank to facilitate payments. Imposing severe sanctions on the bank could trigger a retaliatory shutoff of gas from Russia. So, for now, the US has imposed more limited sanctions on Gazprombank that prevent it from raising funds in the US.

Even so, PetroSA appears to have been spooked by the prospect of partnering with a Russian company.

The technical team that assessed the bids in March 2023 asked the board to consider the top six companies, even though everyone except Gazprombank failed to pass the technical evaluation. 

Aside from Gazprombank and BB Energy Gulf, this now put Azerbaijan’s Socar and China’s CMEC in the running, along with two South African companies: Phezulu Natural Energy Resources and Theza Oil and Gas Exploration.

The board, however, went its own way. 

On 15 May, it passed a resolution that selected Gazprombank as the preferred bidder to refurbish the gas-to-liquids refinery in Mossel Bay, but added: “In the event that the negotiations with GPB Africa are unsuccessful and no commercial agreement is reached … the offers received from CMEC and Socar will be considered in line with the preference to partner with State-Owned Companies which was stipulated in the Request for Proposals.”

It is important to remember that being state-owned was not a requirement of the tender: bidders would get points for state ownership, but both BB Energy and Phezulu had outscored their rivals without it. 

The board’s decision put PetroSA in a legal pickle: on the one hand, could it risk partnering with a Russian company? On the other, could it risk the legal fallout if it changed the rules of the tender and rejected the only qualifying bid?

Cut your losses

When Ledwaba Mazwai Attorneys was brought on board in July 2023 it was given a simple brief: “[P]rovide a legal opinion to confirm that the process followed to enter into negotiations with CMEC and Socar is legally defendable.”

The answer PetroSA received was a firm no: “[O]ur opinion is that … PetroSA is not entitled to negotiate with CMEC and Socar.”

The RFP allowed PetroSA to negotiate with the top three bidders, but only if no one met the 80% technical threshold, the attorneys reasoned.

“PetroSA cannot enter into negotiations with the Bidders who did not meet the minimum 80 points under the circumstances where there is a Bidder who has met the minimum points,” the firm wrote in its August 2023 opinion. 

“We recommend that PetroSA withdraw the RFP and reissue it,” the firm concluded, adding that it “would have to improve the wording of the evaluation criteria” next time around. 

Drill, baby, drill

All indications are that PetroSA chose to ignore this piece of advice. 

Instead, PetroSA commissioned a second opinion from Centurion Law Group, a boutique law firm in Sandton run by controversial Cameroonian lawyer and lobbyist, NJ Ayuk.

Questions about his past have dogged Ayuk following news articles suggesting he was the same man who in 2007 pled guilty to fraud charges in the US. His spokesperson has denied the claims, stating, “These allegations have been debunked many times.”

More recently though, Ayuk has rebranded himself as “a leading authority in the African energy sector and a strong advocate for African entrepreneurship”.

In his opening address at Africa Energy Week – a pro-gas, pro-coal, pro-nuclear energy conference he organises – he encouraged government leaders to exploit their country’s gas reserves, telling them to “drill, baby, drill”.

When PetroSA wanted an opinion on whether partnering with Gazprombank posed a sanctions risk, it turned to Ayuk’s firm.

Sanctions risk

The legal opinion, written by a senior attorney in Ayuk’s law firm, is detailed and appears well-reasoned. It argues that the sanctions imposed by the US and UK on Gazprombank would extend to GPB Africa even though the local subsidiary is not named on the sanctions list.

But it also argues that the sanctions imposed against Russian entities have been primary sanctions, not secondary. This would prevent US and UK companies from transacting with Gazprombank but would not prevent other countries from doing so. 

“[A]ll the United States Russian Sanctions programs only restrict United States persons or entities from doing business with the listed Russian entities/persons,” the opinion reads.

“Even assuming that there may be a risk, no matter how small that risks [sic] may be, the facts do not show that any ‘non-US person’ has thus far been sanctioned for transacting with a sanctioned Russian person on transactions that occur entirely outside the Russian Federation.”

However, the opinion ends with a word of caution: “[I]t is important for PetroSA to consider the potential reputational impact/international geopolitical repercussions (and even the potential threat of the imposition of secondary sanctions) that could result from doing business with a sanctioned entity that is effectively owned and controlled by the Russian Federation.”

In other words, going into business with Gazprombank may not immediately lead to sanctions on South Africa, but accepting large amounts of money and gas from Russia would have fallout.

Reserve Bank warning

This was partly what the Reserve Bank was getting at when it added “secondary sanctions amid heightened geopolitical polarisation” to its economic risk dashboard in May, in the wake of the Lady R incident.

“The risk of secondary or indirect sanctions being imposed on South Africa if its neutral stance on the Russia-Ukraine war is perceived as unconvincing has increased,” it warned in May, in the wake of the Lady R incident.

The Reserve Bank’s risk and vulnerability matrix considered the risk to be moderate – less likely than “slow and inequitable domestic growth” but more likely than a “successful systemic cyberattack”.

The impact, however, could be catastrophic if South African banks lost their ability to make payments in US dollars. 

“Should this risk materialise, the South African financial system will not be able to function if it is not able to make international payments in USD and it could lead to a sudden stop to capital inflows and increased outflows,” the bank warned. 

But is PetroSA listening?

Full steam ahead

In October, energy minister Gwede Mantashe told journalists at Africa Energy Week that a deal on the R3.7-billion gas-to-liquids refinery was imminent: “[W]e have already seen and shortlisted three partners that have complied with all the requirements. We are hoping that before December we will finalise the partnership with whoever agrees to work with us.”

AmaBhungane understands from a source privy to some of the negotiations that PetroSA plans to present Gazprombank’s name to Cabinet before the end of this month.

PetroSA chose not to respond to any questions, saying instead: “PetroSA is currently undergoing Stakeholder Engagements with various governance structures and therefore cannot comment on the matter.” DM

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Comments - Please in order to comment.

  • Ken Shai says:

    After SA was chairing AGOA meeting, there is zero risk of secondary sanctions against SA. Go ahead! US knows that in case of secondary sanctions SA may offer China to host a naval base, and that is something they want to absolutely avoid. Also, SA opinion matters for other African countries, and US may have to sanction the whole continent, they are not going to do that. Go ahead and do business with companies sanctioned by US if there is a good business case.

    • George 007 says:

      A better way to look at SA’s relationships with the US and Russia is to determine which country does more for SA. The hands-down winner is the US. Why would you jeopardize the relationship for any reason?

      • Vusi Dladla says:

        Although I think the line minister or cabinet will overrule this decision, George, it’s not only what country currently does more for South Africa that matters. It is also important to look at the future -economy, politics, etc.

        • D'Esprit Dan says:

          I’d like to have a government that does exactly that – in an impartial, mature and constructive manner, instead of the student-level binary drivel that passes for ‘policy’ in South Africa. COuntries such as Zambia, Tanzania, DR-Congo, Ghana, Angola, Nigeria and others in Africa have a much more nuanced and balanced approach to policy than our puerile, 1950s megaphone diplomacy: these countries are using the contestation between ‘east’ and ‘west’ whatever that is (given that Japan, the land of the rising sun is ‘western’), to attract investment in infrastructure and industry TO THE BENEFIT OF THEIR COUNTRIES, not to sate the egos (and fatten the wallets) of our frankly, blunt and greedy elite. You don’t have to exist in a small-minded binary world to progress; in fact you’re better off having engagements – open, honest, robust and constructive – with all sides. Our mob are incapable of even the most basic strategic thought that may benefit ordinary South Africans. To wit: we’ve heard several politicians in SA say that losing AGOA isn’t a problem, largely because they’re immune from the job losses it would cause; this constant cosying up to Russia will only lead to greater calls for us to be booted – who will employ those auto workers, wine and fruit industry workers, chemicals workers? None of our BRICS partners will make up the deficit.

      • Ken Shai says:

        In order to get more money out of US, they will only give even more if they think SA can go to the other side. The other side will also give more. Besides, China is a larger partner than US, and we are already getting some help from China.

    • Glyn Morgan says:

      Not well thought out, Ken. The US only has to give SA a small economic hint of a tweak to have a huge financial fall-out locally.

      • Ken Shai says:

        It is exaggerated by DA which is a puppet of US. Look at Russia, with unprecedented sanction their economy is growing 3% with record low unemployment, much much better than EU countries imposing the sanction. Russia showed that a country can rebel against US domination, US will go all out to punish , and still win! Russia gives example how to confront US and win.

        • John Lewis says:

          You’re a reliably funny man!

        • Alan Thompson says:

          It’s quite an achievement to post something where almost every sentence is factually wrong, but let’s deal with the big things:
          1. Russia’s economy is not growing 3%, and in any case most of the growth is confined to the defence budget.
          2. Growth this year is indexing against last year’s decline.
          3. It is widely predicted to flatline next year after the “election”
          4. GDP is still smaller than 2014
          5. Average wages in USD are half of what they were in 2014.

          This doesn’t sound like “winning”.

          Or, we could grow up and accept there is more interest getting close to the biggest, wealthiest, democracy in the world who have given specific trade breaks for us to build our economy than cosying up to a corrupt, totalitarian country with a total economy roughly the same size as Canada or Italy.

          * source: “Why the Russian Economy’s Luck is Running Out”

          • D'Esprit Dan says:

            Facts, dear boy, facts! They have no place in the revolutionary thought process! You’ll probably get told that they’re lies and western propaganda…

        • Lisbeth Scalabrini says:

          “The IMF said this week that significant spending and resilient consumption in a tight labour market would support gross domestic product (GDP) growth of 2.2% this year in Russia, but it lowered its forecast for 2024 growth to just 1.1%.”

          • Johann Olivier says:

            From the IMF:
            Russia’s current-account surplus cratered almost 80% during the first nine months of 2023 from a year earlier to $41 billion. The country’s revenues from energy, a key economic driver for the oil-rich nation, dropped 41% year-on-year to just $25 billion in the seven months through July.

            Meanwhile, the ruble is another sign of economic weakness. It has dropped 10% against the US dollar since Vladimir Putin’s invasion – and that’s despite the Bank of Russia repeatedly raising interest rates in a bid to prop up the currency.

            Lastly, war itself is having an impact. Russia is now facing record worker shortages because so much of its population have either been called up to fight or chosen to emigrate, according to data published in April.

            So while the Kremlin might be right that Russia has reasons for economic optimism, don’t believe its claim that sanctions and a brutal and expensive war are not having an impact.

            And Russia has stopped reporting many key economic indicators. Russia is in a hole. The ruble makes the rand look like a powerhouse.

    • D'Esprit Dan says:

      “if there is a good business case.”

      Exactly – there isn’t when the tender process has been manipulated to have only one bidder!

  • Ben Hawkins says:

    Communist ANC Government will do anything to jeopardize South Africa

    • Mkili Muzenha says:

      We will never support butchering of children. We are moral like that.

      • D'Esprit Dan says:

        Not sure if you’re aware, but Russia invaded Ukraine last year. According to the UN’s Reliefweb, at least 1,700 children have been killed so far, almost all by the indiscriminate bombing of Ukrainian cities and villages by Russia. I realise that the ‘left’ in South Africa still carries a torch for the Cold War days of the 1960s and 70s, but even by those standards, Russia’s invasion of Ukraine and the butchering of civilians, rape of women and abduction of children is a war crime. For which Putin has been indicted. As was the case with Bashir in Sudan, whose Janjaweed militias committed genocide against ethnically black Africans in Darfur, our sleazy, duplicitous and utterly immoral regime threatened to withdraw from the ICC in support of a mass murderer – the same ICC they’re now clamouring for to take action against Israel (personally I think they should, but in the ANCs case, its more a case of a stopped clock being right twice a day, rather than principle and morality coming to the fore).

        • Ken Shai says:

          Russia is portrayed horribly in the media simply because it rebelled against US and won! Its economy is in great shape , while Ukraine defeat is inevitable and adds to US defeats in Afghanistan, Iraq and Vietnam and everywhere else. Russia is the opposite of Israel, it take utmost care to minimize civilian casualties and treats Ukrainians like the same nation only brainwashed. But of course ICC being a US and EU puppet and propaganda arm would only indict Putin, not the real war criminal Netaniyahu simply because Israel is US ally and Russia is a US enemy.

          • D'Esprit Dan says:

            You don’t have to look only at ‘western media’ to see that the Russian invasion of Ukraine was illegal, it’s actions barbaric and that carpet bombing Ukrainian villages is hardly selective: absolute rubbish! And if the ICC is a western puppet organisation, why is our government now running off to it asking for an indictment of Netanyahu? Your arguments are nonsensical. And I note you’ve completely avoided the points about Bashir and his murderous regime. Selective, much?

      • Middle aged Mike says:

        Sure you are. Omar al Bashar ring a bell?

        • Ken Shai says:

          Russian invasion of Ukraine was only illegal if the laws are made in US. Russia could not tolerate US puppet and proxy Ukrainian regime on its doorstep, and especially when Ukraine breaking previous peace agreements with Russia moved to seize back Crimea and Donbass where population voted to be part of Russia. Russia struck preemptively in a courageous but absolutely necessary decision and I applaud Putin for having done that! And regarding Sudan, Sudan is not a threat to any other country because it does not think they are a chosen people and does not have an ambition to rule the whole world. Sudan is better left alone, whereas two nations who think they are chosen by God and who aspire to rule the world, US and Israel, should be resisted by others by all means possible.

          • D'Esprit Dan says:

            Right, so ethnic cleansing and genocide in Sudan is okay because they’re a weak, poor nation? Just dirty voters, as Nomvula Mokonyane characterises the poor and disempowered in South Africa.

            Putin, as opposed to Russia, has also invaded Georgia in recent years, and carpet bombed Chechnya into oblivion inside his own country. Ukraine was invaded by Russia in 2014 (Crimea) and has no legitimate claim to it: if having a Russian-speaking majority is claim enough, should we give the Free State to Lesotho (which claims large swathes of it), Mpumalanga to Eswatini (ditto) and the North West to Botswana, given there are families on both sides of the border (actually given what a dump the ANC has made that province, I doubt Botswana would want it!).

          • Johann Olivier says:

            Mr. Shai: troll … anyone … ?

  • Alfreda Frantzen says:

    I may be naive, but there is a true saying, “Follow the money…” Who is most going to benefit from all this? The average South African? No, our money-grubbing politicians…

  • David Katz says:

    Zondo commission was a waste of time. Zuma’s friends still doing business the Gupta way. We have become a pariah state on the global stage.
    Russians must have secrets of the ANC. 1st choice, the nuclear program – scuttled. Now an alternate pay back

  • George 007 says:

    How can 19 of 20 bids not be qualified? This doesn’t pass the smell test.

    • andrew farrer says:

      It’s how the gvmt justifies tenders theese days. 1-have your corrupt gupta/ putin buddies write a proposal and matching tender very specific to their proposal including awarding of / not awarding points to disqualify/ disadvantage anyone other then their buddy. 2- put the tender out with a very short response time, so fewer companies tender. 3-award tender to gupta/ putin buddy at inflated price and receive kickback..

  • Sydney Kaye says:

    Companies workd wide are afraid of getting involved with bribes and kickbacks in third world countries. But obviously hot Russian ones.

  • Hilary Morris says:

    Gwede Mantashe – where have we heard that name before? Why is it always accompanied by bells, whistles and flashing lights? I am mentally deleting a string of expletives that have no place in a respectable publication. The only possible end for this is yet another disaster as we hurtle towards failed-state-ism. Feeling helpless anyone?

  • Mkili Muzenha says:

    I’ve been watching some of the European Champions League team being sponsored by Gazprom and we, as a country of majority black people, we are told not to work with Russians because of Ukraine

    That’s pretty much nonsensical

    And then you also have people in SA who find it cute and nice that Israel is butchering children in Palenstine, and they want SA to take the side of a murderer.

    SA must do business with whoever they feel they need to do business with and as a country, we are known as not a people that chooses sides.

    Yes during the apartheid era, SA chose sides with whoever was ok with the regime killing black people and now that the regime is out of power, there are still those who want SA to side with butchers.

    • D'Esprit Dan says:

      Bashir’s evil regime slaughtered an estimated 400,000 black Africans based purely on ethnicity in Darfur in 2003. The sleazy ANC regime of the day was extremely vocal on the matter – they threatened to withdraw from the ICC and helped Bashir to escape from South Africa and avoid arrest under the ICC warrant.

      Today, the same Janjaweed militia, now called the RSF is slaughtering and raping its way across large swathes of Darfur again, even slaughtering refugees in camps who’ve fled their homes – don’t take my word for it, Al Jazeera covers it in grim detail. Our sleazy, duplicitous and utterly immoral regime has remained stubbornly silent on these atrocities, which have left millions of other black Africans displaced, women sold into sexual slavery and children used as slave labour.

      The SG of the ANC congratulated ZANU-PF on stealing another election in Zimbabwe, despite all the evidence of widespread intimidation of opposition politicians and activists (much like happened under apartheid), and the flood of millions of political and economic refugees from Zimbabwe into South Africa, over the last two decades, causing hardship and destabilisation in our own country. Not one ANC minister or president has had the backbone to condemn the brutality of ZANU-PF over this time.

      I guess black lives only matter when it’s the rich and powerful.

      • Ken Shai says:

        ANC congratulated Biden and Democratic party of US, so why use double standards and not to congratulate Zanu, especially both had the same issues? What I like about our Presidents he is against double standards.

        • D'Esprit Dan says:

          Our President has no standards. When the Zuma mob kicked the bar onto the ground, spineless Cyril still managed to squirm his way under it.

          I have no brief for the US or its foreign policy, but if you’re comparing Biden’s win to ZANU-PFs, you’re being willfully obtuse: the two processes that got them there are completely different; no activists were tortured or arrested by the police in the US elections and millions of Americans are fleeing to the paradise of Cuba to find refuge from a brutal regime.

          • D'Esprit Dan says:

            Oops! *aren’t fleeing!

          • Ken Shai says:

            Yes, many activists were tortured in US jail, those who peacefully protested against problems with elections were dealt far worse than Al Qaida terrorists. And there was one who could get away and found refuge in Russia. So by no means Biden’s regime is better than Zanu PF

    • D'Esprit Dan says:

      And just out interest, the only teams that Gazprom sponsors in the European leagues were Zenit (Russian), Red Star Belgrade (Serbian, and Russian satellite state) and Schalke (German) – the last of which has cancelled their sponsorship since the illegal invasion of Ukraine and butchering of innocent people. UEFA, likewise, has terminated all sponsorships with Gazprom since Putin’s jackbook barbarians invaded Ukraine. Maybe get up to speed with current events, instead of wallowing in the past?

  • Louis Potgieter says:

    The dilemma could have been avoided if PetroSA had decided up front not to entertain a bid from Gazprom. Mantashe must have decided to press on.

  • Dragon Slayer says:

    How soon before the democratic world with rapid escalating east/west and growing nationalistic [fascist?] tensions starts reviewing relationships on the basis of ‘the friend of my enemy is my enemy’. South Africa as a world charity (and basket) case is certainly more hubris than substance.

  • Johan Herholdt says:

    Oh, so that is why Deputy Prime Minister Mabuza took so many long breaks in Russia – and of course to avail himself of their world-leading medical services.

  • Peter Dexter says:

    I believe the preferred bidder was decided based on the “commission flows” to be paid into cadres’ offshore trust accounts.

  • jennifer slutzkin says:

    So SA condems Israel and acuses them of genocide but does business with the Russians who have killed over 10,000 people in Ukraine …seems everyone has forgotten that war …SA make up your mind who you want to side with…It is not the Soviet Union anymore…..they helped the struggle, not Russia of today.

    • D'Esprit Dan says:

      The ANC of today is not the ANC of the Struggle era either – it has absolutely zero decency, morality or desire to run an efficient, modern and prosperous country: it has only greed and sleaze as its dinner guests. Speaking of which, the ANC and it’s alliance partners remind me more and more of the three men gorging themselves into oblivion in a brilliant short story called Drie Kaalkoppe Eet Tesaame, by Jan Rabie – Google it and read it (only two pages), and sums up this parasitic, destructive mob to a tee!

  • Richard Robinson says:

    If something smells like a rotten fish …?

  • Middle aged Mike says:

    How long before the scam underlying this becomes public knowledge?

  • John Roberts says:

    As someone who was closely involved in the original Mossgas project as a member of the Gencor staff that negotiated a joint exploration agreement with Soekor, took over completing the construction of Mossgas, and a member of the Engen Board who decided to walk away from the option to invest in Mossgas, I have some questions and comments.

    First and basic. Why is anybody trying to revive a project which only made sense under sanctions, and we no longer have sanctions.
    The only merit of Mossgas was it used local raw materials. Without Government subsidies it was never viable.

    The capacity was insufficient to make any strategic difference to the national supply. (the equivalent of about 30000 barrels per day). A far better proposition would have been a Sasol 4 at Springbok Flats.
    The gas reserves were insufficient to give it a decent life, despite the low output.
    The location meant the out-bound logistics were terrible. Its natural hinterland was largely rural. The existing refineries optimum supply areas meant distribution from Mossgas to as far away as the Northern Cape.
    The only justification I ever believed was that it would boost the economy close to the Home Constituency of PW Botha. What an abuse of public money.

    All of these remain and the local gas has been consumed. The characteristics of local oil and gas accumulations is that they tend to be fragmented. In other words the accumulations are small and extraction unduly capital intensive.
    Further, Sasol provided the original technology. Why would any sensible proposal not start with the original advisor and only drift to others if negotiations failed? Despite the Lake Charles debacle, Sasol still has huge project competence.

    There will be those who claim new finds, such as Total, but we have heard very little since the original announcement. I would presume drilling (as with Shell and the Kudu field) has dampened the original euphoria.
    Soekor on behalf of the Apartheid Government drilled offshore and onshore extensively and found no viable accumulations. The only accumulations exploited were the too small gas fields supporting Mossgas, and the extraction of oil though floating platforms processed through the Calref refinery. The seismic results gave much hope. but were confounded by drilling.

    In any project evaluation there are two fundamental questions. Where and what is the market, and what are where are the input resources.
    The project plans to serve a declining market (EV s will be replacing Internal Combustion before the revival is complete) from a logistically disadvantaged position based on uncertain (and at this time unknown) raw materials.
    The project has NO redeeming features.

    If any further questions are needed, it is to ask why the Calref and Enref Refineries (around 120000 barrels a day nameplate and roughly 100000 bbpd actual) and Sapref (around 230000 bbpd nameplate) have been closed and replaced by imports, but someone thinks a 30000 bbpd is worth reviving.
    The inland location enables Natref to compete against imported products so far, but is also likely to close.

    • D'Esprit Dan says:

      Great post! Some really interesting insights. On why Total has gone silent, it’s pretty simple: in Namibia the government has a 10% carried share through Namcor, whereas here government wants 20% as a carried share and 10% for a BEE partner – who would pursue this when next door you’re giving away only 10% in total?

    • Marthinus Wolhuter says:

      jvr, thank you for your inputs. However, there are a number of factors in favour of refurbishing the Petrosa (MossRef) plant. There are huge gas and oil reserves off the coast. Brulpadda, Luiperd fields amongst others. There is a licenced site with room for a lot of expansion. The plant was updated a decade or so ago to process liquid-to-liquid too (to produce diesel mostly). There is a vastly under-utilised industrial site next to the refinery site. There is an open cycle gas turbine powerstation on site to provide emergency electrical power. The output product can be distributed primarily through the Western Cape province (where the market is expanding rapidly) by pipeline, trucks or by tanker vessels via the existing infrastructure in Mossel Bay. Electrical vehicles is a pipe dream in Africa – there is not enough resources on earth to replace all the internal combustion engine (ICE) cars with EVs. Hydrogen fueled ICE vehicles are still a decade into the future.

  • Marthinus Wolhuter says:

    I smell a big fat rat decaying in this tender process! Why is SASOL not a prime contender? The MossRef plant is based on their gas to liquid (GTL) process anyway. Surely SASOL has the capability to refurbish and modernize the refinery. Then the capital spend will benefit South Africa instead of going to the dogs of war.

  • Anne Felgate says:

    Mossgas was an apartheid project because of sanctions at huge cost.
    The gas is now finished
    Where will the gas come from to be refined?
    Does not make any sense at all for the refinery to be refurbished and at that cost.
    Smells like more corruption enabling more snouts in the trough

  • John Lewis says:

    The ANC claims the moral ground over Palestine, yet it is acceding to this deal, which will fund Russian genocide of Ukrainian civilians and ultimately lead to more suffering for South Africans. But as long as Russia keeps the ANC solvent, that’s all okay. Viva, progressive forces, viva!

  • Peter Oosthuizen says:

    There seems to be no end to the stupidity of the morons involved in “managing” SOE’s.

    Right now our membership of AGOA is under threat from the US and the idiots have decided to do business with a sanctioned enterprise. No wonder the country is FUBAR.

  • Stuart Woodhead says:

    And when the ANC ( should they still be in power in 4 or so years time….. unlikely) ,through their communist mates, get the plant up and running, they will insist on their cadre mates operating the plant. Recall the massive explosion some 15 years ago at Mossgas? The cause was technical inexperience and we the tax payers plus Mossgas’s insurers paid out billions to reinstate the plant. Could easily happen again. Just look at Escom and what lack of experienced operators have cost the South African taxpayers and insurance companies who only offer insurance now with huge excesses which again are funded by the tax payer. Never a thought for South Africa just how much can we steal in completing a deal.

  • Gary Palmer says:

    I smell fumes of backhanders, under-table exchanges and blatant political patron enrichment.

  • Michele Rivarola says:

    Walks like a duck, quacks like a duck, look like a duck … it is a duck !!!!

  • District Six says:

    Such foolhardiness. SA doesn’t need big business to manipulate the currency, it just needs Gwede to stick it to everyone. Hubris at large. The “boutique” lawyer sounds like a real peach.

  • Rae Earl says:

    “Gazprom will get a share the profits”.
    So no doubt, will Gwede Mantashe who has corruption suspicions against him as it is for security installations in his house. Why else would he be so adamant that this is the way to go for PetroSA?

  • of course, one corrupt government working with another corrupt government. what a gluttonous feeding trough this will be! surely as a country, we cannot keep allowing these tenders to happen. surely there must be somebody or something that can fight it!

  • Gerrit Steyn says:

    We will still regret this bowing and scraping to Mother Russia- justice comes slowly but surely on her cripple horse, but she comes. What excuse will these wise people then have?

  • P B M .. says:

    Case closed.

  • Alley Cat says:

    So when one dodgy deal is under scrutiny and the risk is correctly pointed out by one firm of attorneys, find another firm of attorneys that will agree with you.
    And the Azerbaijan deal will be just as dodgy, google the below in the Guardian.
    Malta losing money ‘hand over fist’ from Azerbaijan energy deal, claim experts.

  • Andre Swart says:

    The ANC cadres’ last ‘dash for cash’ before they get ousted in the 2024 election?

    This ‘deal’ must be postponed until after the coming election.

  • Dietmar Horn says:

    Ken Shai is obviously a Russian troll. And what is the best way to respond to trolls? Yes, exactly!

  • Alan Cargill says:

    For some reason I cannot see other comments on this article, so apologies if this is a repeat comment.

    Why does being a state owned entity earn additional points on this tender? What is the benefit of that to PetroSA?

    If the situation at the Refinery and Gourikwa power station is to become stable, then can the power station be converted from open to combined cycle?

  • Mike Newton says:

    This installation never made economic sense. It should have been shut down at the end of Apartheid.

  • Yacob Weir says:

    Whose agenda is this article pushing? There is nothing wrong with this award, stop trying to make Americas enemies our enemies.

  • CHRIS HENSTOCK HENSTOCK says:

    I smell a rat….

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