South Africa Favors Gazprom Unit to Revive Dormant Refinery

(Bloomberg) -- South Africa’s cabinet endorsed the state-owned oil company’s recommendation that a unit of Gazprom Group be selected as the investment partner to revive its gas-to-liquids refinery in the southern town of Mossel Bay — a move that’s likely to anger the US, which has imposed sanctions on the state-owned Russian firm.

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PetroSA’s choice of GazpromBank Africa still depends on a final investment decision on the project, with terms and conditions likely to be finalized in April next year, Minister in the Presidency Khumbudzo Ntshavheni told reporters in Pretoria Monday.

South Africa and Russia are both members of the BRICS group of developing nations, which also includes Brazil, India and China. Pretoria has resisted pressure from the US and its allies to isolate Russia over its invasion of Ukraine, adopting a nonaligned stance in the conflict, and runs the risk of being subjected to secondary sanctions should it enter into a deal with a blacklisted Russian entity.

“South Africa’s relationship with the Russian Federation is driven by our partnership in BRICS,” Ntshavheni said “We are aware there are countries that are not happy with our participation in the BRICS. There is no point in South Africa being in BRICS and not wanting to partner with BRICS countries in trade and investment. It is part of us making sure we can build a resilient economy that is not only susceptible to one side of the global balance of powers.”

Production at the 45,000-barrel-a-day Mossel Bay facility was halted in 2020 after local reserves were depleted and the company failed to find more natural gas. Offshore discoveries by TotalEnergies SE could potentially supply the facility.

Various accidents and shutdowns left only a fraction of South Africa’s fuel-making capacity operating in 2022. Sustained outages or closures of the plants would require an increase of imports to meet demand.

(Updates with minister’s comment in fourth paragraph.)

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