The South African cabinet approved the merger of three of the country’s state-owned oil and gas firms to form a single national oil company. The reduction in number of state-owned firms is an attempt to cut debt and increase the competitiveness of state-owned firms.

The approval was made on Thursday 11th June 2020. In a statement by the government of South Africa, it said that the services of a restructuring company would be engaged to come up with the most suitable model to fit the new National Petroleum Company (NPA) of the country.

The country’s state-owned enterprises (SOEs) are reportedly a major drain on public finances, with several of them heavily gulping taxpayers’ money and making more losses than profit, in debt, or bankrupt. H.E President Cyril Ramaphosa has always emphasized on the need to fix the country’s SOEs, including the power utility, Eskom, and the South African Airways.

The note from the cabinet said that PetroSA, which is the National Oil Company (NOC) of South Africa responsible for extraction of natural gas from offshore fields, production of synthetic fuels through a gas to liquids (GTL) process, and the extraction of crude oil from oil fields off the South Coast of South Africa, would be merged to form the new National Oil Company.

The GTL refinery is located in Mossel Bay,  with a capacity of about 45,000 barrels per day and processes both the gas and condensate to produce liquid fuels and chemicals. PetroSA was formed in 2002 from the merger of three previous entities: Mossgas Limited, Soekor Limited, and parts of the Strategic Fuel Fund Association.

PetroSA was once a booming company but has suffered various setbacks recently, due to dwindling domestic gas feedstock at the Mossel Bay refinery, and is now counting on a new Total oil and gas discovery offshore. The company reported a 2.08 billion rand net loss and a debt of 1.917 billion rand for the 2018/19 financial year.