South Africa’s state-owned oil and gas entity, PetroSA, has posted a pre-tax profit of R1,8-billion for the financial year ended March 31 2005, a substantial improvement on the R240-million recorded in 2004, on the back of record high international oil prices, a firmer rand and strict cost containment.
The company has also approved plans to construct a 100km-long pipeline to transport gas supplies to the group’s offshore processing plant, a project valued at about R2,5-billion, it said on Wednesday.
PetroSA was formed in January 2002 through the merger of state-owned gas-to-liquids producer Mossgas, and oil and gas exploration and production company Soekor. Turnover for the 2005 financial year topped R6-billion, almost double the R3,4-billion recorded the previous year.
Over the 12 months to the end of March, the rand strengthened from an average exchange rate of R7,20 to the dollar in 2004 to R6,28 during 2005. In addition, the average crude oil price for the 2005 financial year was $42 per barrel, as opposed to $28,90 a barrel for the previous year.
As a result, PetroSA benefited from lower dollar-denominated costs on its offshore drilling activities and the sourcing of oil-condensate stocks on international markets. However, this was slightly offset by the company receiving lower total operating income, as the bulk of its finished products are priced to the market in dollars.
Other major contributors to the company’s improved performance included the absence of a statutory plant shutdown at its Mossel Bay manufacturing operation — a factor that had negatively affected the 2004 financial results, while the group’s Sable oil field is now performing above expectations and productivity from the Oribi and Oryx fields exceeded forecasts.
Commenting on the results, PetroSA president and CEO Sipho Mkhize said: “We are extremely pleased with our financial results for 2005. After a slow start, the Sable oil field is now producing beyond our expectations and the production difficulties which beset us last year at our Mossel Bay plant are clearly behind us.
“In addition, our level of cost containment was better than expected. On top of that, the generally high international oil prices greatly enhanced our revenue flows.”
The financial results were underpinned by an excellent safety and environmental performance, with an injury frequency rate of 0,05 and more than three million disabling-injury-free working hours.
Going forward, Mkhize said issues around the long-term sustainability of feedstock resources for the Mossel Bay plant still have to be dealt with satisfactorily, as does the roll-out of the full commercialisation of the Fischer-Tropsch gas-to-liquids (GTL) fuel technology that PetroSA is busy testing at Mossel Bay.
During the year, PetroSA made great strides in securing additional oil and gas reserves. In May 2004, it acquired Brass Exploration Unlimited of Nigeria, which has a 40% interest in the Abana oilfield off the coast of Nigeria. A total of 2,15-million barrels was produced by the Abana field in 2005.
The company is busy securing further oil and gas reserves through its exploration interests in Gabon, Equatorial Guinea, Sudan, Nigeria and Algeria, it said.
The GTL refinery at Mossel Bay is expected to start running out of its own feedstock from 2008. To address the potential shortfall of gas, PetroSA has approved a R2,5-billion project to connect six additional gas fields through a new 100km pipeline to the existing offshore gas platform. These fields are scheduled to come on line in June 2007 and will provide gas for the GTL refinery until 2012 and possibly beyond.
“The size and life of our existing reserves are not sufficient to meet the company’s long-term strategic objectives and provide a suitable platform for future growth,” explained Mkhize. “Finding additional reserves with a more diverse geographical and risk profile is therefore essential for the long-term sustainability of the company,”
During 2005, PetroSA’s management was restructured to optimise efficiencies and, along with further exploration and the expansion of its existing oil reserves, the company has committed itself to an aggressive future growth strategy that will project PetroSA into the position of a global player.
Looking ahead, Mkhize said a solid foundation has been laid for robust future growth of the facility within the context of positive market developments such as the sustained higher-level international oil prices, the modestly strengthening rand and growing interest in alternative fuel sources such as PetroSA’s unique GTL fuel technology, the full commercialisation of which is in progress. — I-Net Bridge