Russian-backed project to restart South African gas-to-liquids refinery in limbo

A proposed project to restart a gas-to-liquids (GTL) refinery in South Africa remains in abeyance after a losing bidder approached the court to set aside the tender award.

PetroSA, a state-owned company, awarded the approximately $1bn tender to refurbish the 46,000 barrel per day (bpd) Mossel Bay refinery, also called the PetroSA Refinery or Mossgas, to Russian financial institution Gazprombank’s South African unit in November 2023.

However, Phezulu Natural Energy Resources filed a court case in September 2024 seeking an order to set aside the award to the bank as well as South African businessman, Lawrence Mulaudzi through his company, Equator Holdings. The US sanctioned Gazprombank in November 2024.

“The processes for the awarding of RFP0001/2023 to Gazprombank South Africa are currently before a court of law for consideration. Therefore, taking into account the legal proceedings underway, PetroSA will not be providing any commentary regarding RFP0001/2023,” Business Report wrote on January 27, citing a PetroSA official.

The tender includes refurbishment of the FA offshore platform, which connects offshore gas to pipelines that bring gas onshore.

Reports claim that Equator Holdings won the tender despite having been eliminated after scoring zero points out of 100. The deal ran into more challenges in 2024 after Gazprombank allegedly failed to provide about $200mn it pledged. Also, the project's link to the US-sanctioned financial institution could worsen the problems.

Built during the 1980s and commissioned in 1992 by PetroSA’s predecessor Mossgas, the Mossel Bay refinery produced liquid fuels such as petrol, diesel, and kerosene from offshore natural gas. It 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 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.