SA picks Russia’s Gazprombank as PetroSA refinery partner

South African national oil company PetroSA is confident it will not fall foul of Western sanctions after choosing Russia’s Gazprombank Africa as preferred investment partner to restart their refinery at Mossel Bay, senior officials said on Monday.

Sweeping Western sanctions have hit Russia’s financial sector since the invasion of Ukraine in February 2022. Gazprombank, Russia’s third-largest lender by assets and a key conduit of Russian energy trade was directly targeted, though not as severely as some other lenders.

PetroSA officials said they have taken legal advice and do not believe they will contravene Western sanctions should the Gazprombank deal to restart its gas-to-liquid (GTL) refinery proceed.

“These sanctions are not applicable to South Africa,” Sesakho Magadla, PetroSA’s acting chief operations officer, told a media briefing.

Gazprombank did not immediately reply to a request for comment.

The 45 000 barrel per day (bpd) Mossel Bay GTL plant has been under care and maintenance since 2020 because of dwindling domestic offshore gas resources.

PetroSA has been looking for investors to try to restore operations at the plant as South Africa frets about security of fuel supply after the closure of its two largest refineries, Sapref and Enref, because of accidents and business decisions.

South Africa’s cabinet endorsed the decision to select Gazprombank, adding that it was dependent on a final investment decision expected by April.

The mothballed GTL plant is a key element of negotiations between TotalEnergies TTEF.PA and PetroSA over a gas supply agreement that could link a huge TotalEnergies gas discovery to a PetroSA offshore platform.

The platform is linked via pipeline directly to Mossel Bay, which could accelerate potential gas supplies from the TotalEnergies field.

Talks on the possible tie-up, however, have become bogged down over the gas price, several sources have told Reuters.

“Negotiations have slowed down due to the parties not finding each other on the price, but we are very committed that indigenous gas is commercialised,” said acting CEO Sandiswe Ncemane.

She added that first gas from TotalEnergies’ Luiperd discovery, close to Mossel Bay, is not expected before 2030.