State-owned PetroSA has suffered an estimated R1,5-billion loss, allegedly caused by a technical foul-up that shut down the company’s Mossel Bay oil-from-gas plant on July 3 this year.
Thus far PetroSA has refused to quantify publicly the cost of the breakdown, caused by the failure of all three steam-generating units at its production plant (formerly known as Mossgas), but an internal memo seen by the Mail & Guardian contains this staggering estimate.
The memo also lays the blame for the incident on a botched restruc-
turing and transformation process that left the plant with “poor or inexperienced management”.
According to the memo, all three production lines were shut down “due to contamination in the water used to generate steam”. This resulted in the rapid corrosion and failure of tubing, which in turn shut down the whole plant.
The plant is supposed to use specially refined water to transfer excess heat generated by the refining process. The water is “polished” on site to remove gases and microscopic particles so that it can be used at the enormous pressures and temperatures within the plant.
Following the controversial maintenance shutdown earlier this year — marred by a strike and concerns over the awarding of labour contracts — it is alleged that the plant was restarted without the required water quality.
A source at the plant told the M&G: “The water is used at very high temperatures. If there is any contamination it builds up as a deposit in the tubing. That prevents heat from being removed, so you get over-heating. Gas dissolved in the water can lead to enormous pressure build-up and tubing failure.”
According to the memo, the major causes of the failure were:
Organisational changes. The restructuring left the relevant unit with only three competent individuals instead of the nine it had had. Of these, one was reassigned to another project and another was on leave at the time, leaving a relatively junior section manager in charge.
The plant was run on “traction mode”: that is “manual” rather than “automatic”. In traction mode danger signals can be overridden.
Management allegedly ignored warning signs. The memo says personnel in the central control room issued several warnings that the water quality was not right, but they were allegedly not taken seriously by the production manager.
There was an alleged deviation from work practice, in that the three production trains were started up simultaneously instead of in sequence (this presumably resulted in all three suffering damage).
The memo states: “All of the above factors relate to poor/inexperienced management. Experienced people — mainly white — were given packages and encouraged in various ways … to leave the company.”
One production train was repaired and recommissioned in September at 70% capacity. The other two will only resume production in mid- to late December.
The allegations are potentially extremely damaging because they could nullify or reduce any insurance payout.
“The issue of the plant is a very sensitive one from an insurance point of view,” PetroSA CEO Mpumulelo Tshume (who resigned in September but is still employed until December) told the M&G.
Tshume denied being aware of the specific allegations made in the memo: “I am not aware of a document like that or of the R1,5-billion estimate. Our position is that there are technical problems in the plant, which have led to what we are experiencing now.”
Tshume denied a previous M&G report citing water problems: “One of your articles referred to water contamination. That’s not the case. If the water was contaminated then there might be no basis for our insurance claim. The insurers have already seized on that article. We need to take the insurance process to its logical conclusion, then we will be happy to cooperate. There is nothing we want to hide.”
But Tshume contradicts PetroSA’s own official newsletter, Yiza Sithethe, which in late July carried a story about the breakdown, stating: “On 3 July 2003 it was detected that the plant was not performing as normal. It was later discovered that there was contamination in the water used to generate the steam in the reformer plant. This resulted in corrosion and failure of the tubes in the waste heat steam generating plant.”
PetroSA chose not to comment this week, saying it would need more time to do so.