The Central Energy Fund declined to comment on Wednesday on a report that four of the six remaining board members of PetroSA tendered their resignations.
BusinessLive reported that the resignations of now interim board chairperson Wilfred Ngubane, Thami Hlongwa, Johlene Ntwane and Banothile Makhubela have left the State-owned entity with no quorum as the former eight-member board needs a minimum of three members to reach decisions.
“Consistent with our attitude, we will not comment about internal processes about PetroSA and any of our subsidiary entities, such until such time that the CEF feels it’s necessary,” was CEF spokesperson Jacky Mashapu’s official response to Fin24 on the matter.
According to BusinessLive, the four resignations came after CEF chairperson Luvo Makasi in a letter asked the PetroSA board members to resign with immediate effect, or give oral representations at the entity’s annual general meeting as to why they should remain in their positions.
There are currently only two board members left - Owen Tobias and William Steenkamp.
PetroSA has suffered significant financial losses over the past three years.
According to BusinessLive, it projected a financial loss of R2.2-billion in the year to end-March 2017. Fin24 earlier reported that the state-owned entity suffered losses of more than R14-billion in the 2014/15 financial year.
The losses in 2014/15 were ascribed to poor management of Project Ikhwezi, which entails the finding of new gas deposits under the sea off Mossel Bay to feed PetroSA’s Mossel Bay gas-to-liquids refinery.
Three out of the five drilling wells yielded a modest 25-billion cubic feet of gas out of an expected 242-billion cubic feet. In the mid-2000s PetroSA had a cash balance of more than R10-billion, but the project has since put its balance sheet under considerable pressure – to such an extent that the Mossel Bay refinery risks closure in March next year.
Project Ikhwezi was expected to deliver the first gas in March 2013, which would have extended the refinery’s lifespan to 2019. The first deposits, however, were only available some 21 months later by December 2014. A number of top executives were fired due to the botched project.
The situation was made worse by the drop in oil prices since 2014, as well as higher capital costs.
PetroSA’s management told Parliament last year that Project Ikhwezi wasn’t subjected to the required due diligence and corporate management processes because of the urgency to deliver gas to the Mossel Bay refinery.
Risk management was inadequate, the board wasn’t notified in time of various problems, and there were delays in the delivery of equipment. In addition, a number of contractors were changed.