PetroSA need economic recovery to aid decision making

PetroSA

South Africa's national oil company PetroSA are without doubt one of the many companies hoping the global economic recovery is truly underway and that the recession is not of the "W"-shaped variety.

Market upticks in the global oil and gas industry have created a few born-again optimists, but many analysts and experts remain cautious over its progress. But for PetroSA the condition of the market is particularly significant as it prepares to make a few rather important decisions.

PetrSA has a national obligation to continually supply liquid fuels to South Africa and what it really doesn't need is the distraction of a temperamental economic environment. Some of the decisions it has to take relate to the 400,000-barrel-a-day crude oil refinery in Coega, near Port Elizabeth, a refinery absolutely essential to the country's future energy security.

Final investment decisions

The plant will process heavy, sour crude oil and refine it into fuel products for local and export markets.

As PetroSA await the completion of a technical feasibility study started last year on the refinery, the edge closer to making a final investment decision - also known as Project Mthombo - in the first part of 2011.

PetroSA spokesman Thabo Mabaso said in a statement: "The full feasibility study has been completed and this will then be subjected to internal approval processes, by such bodies as the PetroSA executive committee and board. If approval is granted, the next phase of the project is the front- end engineering and design stage."

PetroSA has also publicly stated that it wishes to keep only a 37.5 percent interest in the project and will seek private equity investors for the rest.

Learning a lesson

The company fared far better than many firms across all industries during the worst of the crisis, and in the past financial year, the company improved its revenue 18 percent, from the previous R10.3 billion to R12.1 billion. This was mainly because of a slight improvement in the average price of crude oil and a 24 percent weakening of the rand against the dollar. Most importantly, PetroSA was able to get a 3 percent increase in net profit and swelled government coffers with a R725 million dividend, as reported by AllAfrica.com.

You would think this had given the oil firm good reason to remain positive about their prospects for 2010, but executives have learnt to remain cautious while working in an industry that relies heavily on the performance of other sectors.

Nonetheless PetroSA will also, in the next few months, complete a technical study of its joint-venture mature field project with Venezuela national oil company PDVSA. Company CEO Sipho Mkhize Mkhize last year said the company was investing up to R10 million to complete the study within six months.

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