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SacOil sets sights on oil-to-gas initiative

Oil and gas company SacOil was eyeing participation in the government’s mooted gas-to-power procurement programme, chief executive Thabo Kgogo said yesterday.

The National Treasury earlier this year said the planned independent power producer (IPP) gas-to-power power programme would contribute a total of 3 126 megawatts.
It will be similar to the renewable energy procurement, which has seen private companies build renewable energy projects in the country. More than 2 000MW of renewable power has so far been connected to the national grid.

Speaking a day after the release of the company’s results for the year ended February, Kgogo said SacOil was currently talking to potential partners in preparation for a possible participation in the programme.

SacOil has a strategic goal to have activities across the energy value chain. He said the company would consider participation in the programme once the government got the procurement under way.

Kgogo said the company’s participation in the programme was likely to be through a joint venture with an established energy player.

“You want a company that is strong technically. One that has implemented similar projects elsewhere,” he said.

He referred to an arrangement similar to its activities in Block III, an oil block in the Democratic Republic of Congo in which energy company Total is a majority shareholder and operator. SacOil’s wholly-owned subsidiary SacOil DRC has a 12.5 percent interest in the oil block.

Similar to the renewable energy programme, the gas-to-power IPP programme is likely to entail a bidding process that will culminate in the selection of so-called preferred bidders that will build and operate the power projects.

Energy chain

SacOil, which is historically an upstream company, has been pursuing opportunities in other segments of the energy value chain. But the group recently walked away from a project to build an estimated $6 billion (R94.2bn), 2 600km pipeline to transport natural gas from Mozambique’s Rovuma Basin to Gauteng.

“We recently made the difficult decision to withdraw our participation in the Mozambique pipeline development during the pre-feasibility stage of the project, due to certain changes introduced in the joint venture agreement relating to the participants in the project, which impacted the equity stake attributable to SacOil,” Kgogo said.

“Accordingly, the board made the decision not to proceed as a participant in the project. We wish the parties well in developing the project over the coming years.”

SacOil has already secured a 12-month contract for the purchase of crude oil grades from the Nigerian National Petroleum Corporation for onward sale.

“The first lifting of the crude oil is expected to take place in the middle of June and should contribute positive cash flows to the group over the contract period,” Kgogo said.

Peak production

He said SacOil’s priority in the past financial year was the completion of the second phase of the Lagia oil field in Egypt.

“We had set ourselves the target to achieve a peak production capability of 1 000 barrels a day by the end of the financial year,” he said.

However, SacOil has reduced production to levels “more suited to the current oil price environment”.

Responding to a question on what oil price would prompt the company to increase production again, SacOil group executive for operations Bradley Cerf yesterday said a sustainable price between $50 and $60 a barrel “will see us increase production”.

“We would like to see a sustainable oil price. But an increase in production comes with an increase in operating costs,” he said.

Meanwhile, in its annual results, SacOil reported a profit of R39.6 million, compared with a R277m loss in the same period last year.

Headline earnings a share were 1.04 cents a share.

Shares in SacOil closed unchanged at 23c yesterday.

Source: IOL

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