Picture: SUNDAY TIMES
Picture: SUNDAY TIMES

STATE oil company PetroSA on Wednesday tabled its annual financial statements to Parliament, confirming speculation of a record loss of R14.5bn for 2015, and stated that "radical actions" would be required to ensure its survival.

The size of the loss, the biggest by a state-owned company, has been the focus of tense discussions within the government for months and has polarised the Department of Energy and MPs on whether executives or board members should be held responsible.

The business of PetroSA includes the exploration and production of oil and natural gas, and the production of synthetic fuels from offshore gas in Mossel Bay. Its sole revenue stream has been the Mossgas refinery. However, PetroSA has ambitions of a bigger role as the holder of the state’s free-carry in new oil and gas interests.

An attempt to extend Mossgas’s lifespan by drilling new wells has been blamed for the bulk of the losses. The exercise resulted in a R12.2bn impairment, says the report. It had been hoped Project Ikhwezi, as it was known, would tap into large new reserves, but it yielded 10% of the expected gas.

The second source of impairments were losses of R2.2bn on PetroSA’s investment in Ghana’s Jubilee oil field.

The company says its offshore oil investments are to be reconsidered and the exploration operation in Equatorial Guinea scaled down. In the report, the auditor-general flagged PetroSA’s Equatorial Guinea subsidiary’s ability to continue as a going concern.

At the end of the financial year, the subsidiary’s liabilities outweighed assets by R1.4bn, and needed a guarantee from the parent company to cover its debts when they fall due.

In an effort to demonstrate she had matters in hand, Energy Minister Tina Joemat-Pettersson suspended group CE Nosizwe Nokwe-Macamo and chief financial officer Lindiwe Mthimunye-Bakoro in June in anticipation of the losses.

The minister has instituted an inquiry into their conduct. However, in an unusual set of circumstances, both were suspended from the executive only, not the board. They have strong support in parts of the African National Congress.

In comments in the annual report, Ms Nokwe-Macamo says PetroSA is in "an extremely precarious position" because of "dwindling cash and feedstock reserves coupled with high overheads and low oil prices".

"Radical and urgent interventions are required to ensure survival of PetroSA," she writes.