In 2023, PetroSA, South Africa’s state-owned oil company, sought to restart its dormant Mossel Bay gas-to-liquids (GTL) refinery by entering into a partnership with Gazprombank Africa, a subsidiary of Russia’s Gazprombank. However, just a year later, the deal is nearing collapse as the Russian bank has failed to meet its financial commitments, according to investigative media outlet amaBhungane.

The agreement, approved by South Africa’s Cabinet in December 2023, involved a ZAR3.7bn (about $200mn) investment from Gazprombank Africa to refurbish the refinery, which has been non-operational since 2020.

The Mossel Bay facility, also called the PetroSA Refinery or Mossgas, has historical significance as one of the largest GTL plants globally. Built during the 1980s and commissioned in 1992 by PetroSA’s predecessor Mossgas, it produced liquid fuels like petrol, diesel, and kerosene from offshore natural gas. The refinery was initially designed to bolster South Africa's energy independence during the apartheid-era sanctions and reduce reliance on imported crude oil.

At its peak, the refinery processed around 36,000 barrels per day (bpd) of synthetic fuel. However, by the 2010s, the offshore gas fields that supplied the facility began to deplete, causing a sharp drop in production. The combination of high operational costs and declining gas supply rendered the plant unsustainable, and operations ceased in 2020 owing to insufficient feedstock.

PetroSA has since explored partnerships to secure new gas sources and modernise the facility, including proposals for importing liquefied natural gas (LNG) and finding new offshore reserves.

Controversial deal

The Gazprombank Africa deal was contentious from the outset, largely because the lender was under US sanctions related to Russia’s full-scale invasion of Ukraine in 2022. Concerns were raised within PetroSA’s bid evaluation committee and board about the risks of working with a sanctioned entity. Following its recent investigation, AmaBhungane also revealed that while 20 companies submitted bids for the project, 19 were disqualified on technicalities, effectively leaving Gazprombank Africa as the sole eligible candidate.

Despite the controversy, the deal received political backing, including support from Mineral Resources and Petroleum Minister Gwede Mantashe, according to amaBhungane, giving it the Cabinet's approval to proceed.

However, complications arose in November 2024 when the US expanded sanctions against Gazprombank, increasing the risks for PetroSA. Engaging with a sanctioned entity now exposed the company to potential secondary sanctions, jeopardising the financial and operational feasibility of restarting the Mossel Bay refinery.

Current Status

By January 2025, the partnership had effectively fallen apart. Gazprombank Africa failed to deliver the promised ZAR 3.7bn investment, leaving PetroSA without the funds needed to refurbish the refinery. This has cast doubt over the future of the Mossel Bay facility.

PetroSA now faces the challenge of finding new funding or partners while grappling with the ZAR10bn environmental liability on their books associated with the refinery, its offshore platform, and gas pipelines. According to amaBhungane, the mothballed refinery is costing PetroSA over ZAR500mn a year to maintain.

Despite these setbacks, the Mossel Bay refinery remains strategically important to South Africa’s energy sector. While the facility is still non-operational, PetroSA is actively exploring alternative strategies, including securing funding or repurposing the site. These efforts align with the country’s broader energy transition goals, highlighting the refinery’s potential to contribute to South Africa’s energy security in the future.