In South Africa, the Portfolio Committee on Energy met with representatives of the Department of Energy and the Central Energy Fund (CEF) on Wednesday, to debate the decision taken to suspend the national oil company of South Africa PetroSA’s top execs, adding that the board should take responsibility.
Committee chairperson Fikile Majola stated: “The PetroSA board is not immune to the problems which beset the company.”
In May this year, the PetroSA Board forced company CEO Nosizwe Nokwe-Macamo, CFO Lindiwe Mthinmunye-Bakoro and acting VP of upstream operations Andrew Dippenaar to take leave or face suspension while an investigation into the company’s poor performance was underway.
The committee questioned the current status relating to the suspension of PetroSA CEO Nosizwe Nokwe-Macamo and two other senior executives by the State-owned oil company board, who have refused to step down.
Majola explained: “We register our concern regarding the suspension of the three top executives. The oil company plays a pivotal role in the energy sector of the country and the supply of petrochemical products to South African oil companies.”
Communication is key
According to the committee, as the oversight body they needed to engage in open communication with South African Energy Minister Tina Joemat-Pettersson and the PetroSA board to get a thorough understanding of the situation and the investigation process going forward, Engineering News reported.
Majola stated: “As the oversight body, it is important to be briefed on the latest developments on what is happening and not to be informed through media reports.”
Reason for suspension
In July, the oil company is expected to release its financial results which are expected to reveal a significant loss, mainly due to the impairment of Project Ikhwezi which was designed to support the performance of Mossgas, the gas-to-synthetic fuel refinery located near Mossel Bay, South Africa.
PetroSA employees told Business Day that the Board revealed to them that the projected loss for the 2014/15 financial year was around ZAR14.9 billion ($1 billion). A significant contributor is an operating loss of ZAR2 billion ($161 million) and the failure of Project Ikhwezi costing ZAR12 billion ($970 million).
According to media reports, the impairment is due to the new wells yielding only 10% of the gas deposits that had been expected when PetroSA invested in the project.
Forward thinking strategy
The CEF presented a turnaround strategy to strengthen the existing governance and financial situation of the oil company which was welcomed by the committee.
Majola said: “The immediate implementation of the turnaround strategy is critical.”
According to reports, the committee was concerned about a possible power struggle between the boards of PetroSA and the CEF which might arise when overseeing the oil company.
The committee felt that the CEF should have the vantage point as the holding company when it came to PetroSA as its subsidiary.
Majola stated that a period of six months should be given to determine if the company can make it out of this situation as a survivor.