A maintenance shutdown foul-up at PetroSA’s (the Petroleum, Oil and Gas Corporation of South Africa) Mossel Bay refinery — formerly Mossgas — may be costing the plant up to R19-million a day in lost production, observers estimate.
The Democratic Alliance, which has been tracking events at the plant, suggests losses will eventually total R800-million. Oil industry experts predict that after returning excellent results this year, PetroSA’s 2004 revenue will be severely hit.
The news of the production breakdown has raised questions about whether the unexpected departure of Mpumelelo Tshume, MD and CEO of the state-owned petroleum company, is related to the losses.
And further controversy has been sparked by allegations that Vuyani Ngcuka, brother-in-law of Minister of Minerals and Energy Phumzile Mlambo-Ngcuka, is embroiled in the botched maintenance contract undertaken for PetroSA.
The Mail & Guardian has established that labour-broker Daluxolo Manpower, of which Ngcuka is a director, recently won an empowerment tender at the plant. Ngucka is the brother of embattled National Director of Public Prosecutions Bulelani Ngcuka, who is married to the minister.
DA Western Cape leader Theuns Botha said the party had referred Vuyani Ngcuka’s involvement to the public protector. The party called for the forensic audit of Daluxolo and another sub-contractor, Tradeflux, “to confirm whether Ngcuka’s obvious relationship with [the minister] poses any conflict of interest”.
Lebo Noruwana, general manager of corporate communications at PetroSA, said the contract had “gone through normal procurement procedures”, with the decision based on “pricing, ability to deliver and previous experience”.
The minister had not known that the contract had been awarded to her relative until more than three months later. She had since “sought guidance” from the public protector.
The Mail & Guardian approached PetroSA spokesperson Nhlanhla Ngwenya with a set of questions about the shut-down more than a week ago. Many were still unanswered at the time of going to press.
Ngwenya would not detail what had gone awry at the gas-to- liquid fuel operation, saying only that a problem had arisen after the maintenance shut-down “that our business could do well without”.
The setback could have happened anywhere, he claimed, drawing parallels with the prolonged shutdown at the Natref refinery in Sasolburg last year. Natref’s shutdown followed an explosion.
Downplaying the seriousness of the setback and its impact on PetroSA’s revenue, he said some of the losses would be covered by insurance and emphasised that this component would be separately accounted for. He refused to quantify the losses, saying they were still subject to insurance investigation.
Tshume has said the plant breakdown resulted from “a combination of technical problems”. These are understood to have involved corrosion caused by the use of contaminated water to generate steam.
Asked whether the plant was still producing at below its 45 000-barrel a day capacity, Ngwenya confirmed that “not all the units are producing”.
He said that the breakdown had been investigated by PetroSA and independent experts, including insurance specialists, and that a preliminary report had been received. He refused to reveal its contents.
PetroSA had decided to undertake a “holistic” repair and maintenance operation later this year “to fix the problem once and for all”, Ngwenya said.
Two weeks ago, Tshume announced his surprise departure from PetroSA, effective from December, saying he wanted to “pursue other interests”.
Six weeks earlier, he reportedly told industry delegates at an empowerment conference that rumours that he had been fired from the parastatal’s board were untrue.
The unscheduled nature of Tshume’s departure is further suggested by the fact that no successor is in place. It was announced that Sipho Mkhize, current Petro SA chairman, would act as stand-in CEO until a suitable replacement was found.
Industry players speculate that while Tshume may have been contemplating his departure, the technical gaffe at the Mossel Bay plant hastened his move.
PetroSA has denied reports that he planned to set up an oil firm with an unnamed partner.
Many in the industry believe that the losses resulting from the breakdown were expected to severely hit PetroSA’s revenue in the coming financial year. They suggested that the problem arose, in part, from awarding parts of the maintenance work to a relatively inexperienced black economic empowerment firm, a claim that Ngwenya angrily denies.
Taking over the entity with a mandate to reform it, Tshume oversaw the integration of Mossgas, the state oil exploration arm Soekor and sections of the Strategic Fuel Fund into a commercially run outfit. He was also charged with staffing PetroSA with “people with requisite skills”, presumably including a potential successor.
This year PetroSA paid the state a dividend of R1,9-billion, from a revenue base of about R5-billion.
On Tshume’s resignation, Mlambo-Ngcuka expressed satisfaction that his mandate had been fulfilled and expressed disappointment at his departure.
Her spokesperson, Khanyo Gqulu, last week said that Tshume had been itching to move since February this year and had been urged to stay on.