President Cyril Ramaphosa released a policy statement this week announcing the formation of state-owned South African National Petroleum Company (SANPC).

The company has been granted approval to start operating in terms of section 51(g)(h) of the Public Finance Management Act of 1999.

The company has been formed following the merger of the Central Energy Fund (CEF) subsidiaries, iGas, PetroSA and the Strategic Fuel Fund (SFF), and has been granted approval to start operating.

Cabinet approved the Department of Mineral Resource and Energy’s request to merge the subsidiaries of the CEF on June 10, 2020.

iGas and SFF are financially viable for the merger, while only the trading division and the Ghana asset of PetroSA are financially viable for the new company.

The remainder of PetroSA that does not form part of the SANPC will form part of legacy assets requiring further work to be done before they can be transferred into the company.

The SANPC will be included as a subsidiary of the CEF Group of Companies until the National Petroleum Bill is promulgated into law. It will use a lease-and-assign model where certain assets of the merging entities will be leased to the SANPC.

 “This approach will improve the financial risk profile for SANPC to secure funding as well as provide a legally sound solution to deal with the constraints associated with the non-profit status of the SFF. At the same time, work has begun to attend to the legacy assets, which include the reinstatement of the gas-to-liquids refinery and the decommissioning liability methodology and provisioning,” said the SANPC in a statement.

The SANPC was poised to become a leading player in South Africa's energy sector, ensuring energy security, driving new technologies, developing and enabling essential infrastructure, fostering strategic partnerships, and propelling social and economic development, the company said.