Professional Documents
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PetroSA Annual Report 2011 PDF
PetroSA Annual Report 2011 PDF
Physical Address: The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd,
151 Frans Conradie Drive, Parow 7500, Republic of South Africa
Tel: +27 21 929 3000, Fax: +27 21 929 3144
Postal Address: The Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd, Private Bag X5,
Parow 7499, Republic of South Africa
WWW.PETROSA.CO.ZA
WORLD CUP EXPENDITURE
The total expenditure on the 2010 Soccer World Cup (inclusive of travel and excursions) amounted to R16 816 439.
Distribution of tickets
Clients/Stakeholders 368* 569 4 696 5 265
Accounting authority
Executive 26 – 359 359
Non-executive 43 – 587 587
Senior management 80 – 884 884
Other employees 597 – 5 899 5 899
Other government entities 113 – 1 474 1 474
Media 13 – 54 54
Total ticket costs 569 13 952 14 521
*Two tickets were missappropriated.
This report is printed on triple green paper. By using certified green paper we have the assurance that the manufacturing process was environmentally
responsible, contributing to the sustainability of the planet’s resources. Triple green paper is produced using renewable fibres such as sugar cane,
elemental chlorine-free bleaching and sustainable afforestation. The paper is recyclable and biodegradable.
PetroSA has reduced the number of copies printed and we have posted an electronic version on our website for quick and easy referencing. Our web
address is www.petrosa.co.za
Our Vision
To be the leading African
energy company
Our Values
• Integrity
• Competitiveness
• Corporate Citizenship
• Harmonious Relationships
with all Stakeholders
R831 million
net profit
F-O FIELD
F-O OFFSHORE
DEVELOPMENT
GAS PROJECT
WILL SUSTAIN GTL
APPROVED
REFINERY
MOSSEL BAY
SAFETY RECORD
GTL REFINERY:
ACHIEVES TARGET
THE WORLD’S
OF LESS THAN 0.4
2ND LARGEST
DISABLING INJURY
COMMERCIAL GTL
FREQUENCY RATE
REFINERY
DEVELOPMENT OF
BUILDING OUR TEAM
SOUTH AFRICA’S
AND STAKEHOLDER
LARGEST SEAWATER
RELATIONS THROUGH
DESALINATION PLANT
THE WORLD CUP
AT MOSSEL BAY
STRIVING TO BECOME
WORKING TOWARDS
A SIGNIFICANT
DEVELOPING WOMEN
PLAYER IN SOUTHERN
LEADERSHIP SKILLS
AFRICA’S PETROLEUM
IN OIL AND ENERGY
INDUSTRY BY 2020
SUBSTANTIAL
VALUES DRIVEN
PROGRESS MADE IN
LEADERSHIP
EVALUATING WEST
PROGRAMME
COAST GAS AND OIL
INITIATED
POTENTIAL
DOWNSTREAM
MARKET ENTRY 14% INCREASE IN
OPPORTUNITIES BBBEE VOLUMES
EXPLORED
R36 million
spent on employee training
and development
CORPORATE TRADING,
NEW VENTURES: NEW VENTURES:
FINANCE STRATEGY AND OPERATIONS SUPPLY AND HUMAN CAPITAL
UPSTREAM MIDSTREAM
PLANNING LOGISTICS
Mr Musa M Zwane
MSc (Industrial Chemistry), MBA
Appointed to the Board:
March 2011
Mr Zwane is currently CEO of
South African Airways Technical. He
previously held various positions at
Sasol, including managing director,
Sasol Gas; General Manager Sales
and Marketing, Sasol Gas and
General Manager: Heating Fuels,
Sasol Oil and was also a member of
the executive team at Sasol Synthetic
Fuels. Prior to Sasol, Mr Zwane
was chemical services manager
with Eskom and a Senior research
scientist at AECI.
Ms Nonhlanhla
Jiyane
ND (Analytical Chemistry),
BCom, MA Acc (Taxation),
CA(SA)
Appointed to the Board:
March 2011
Ms Jiyane has extensive experience
in cost accounting, general auditing,
business consulting, bookkeeping
and taxation. She is currently
managing partner at Chili & Co (a
firm of accountants and auditors). Her
previous positions include director and
manager at Ngubane & Co, part-time
audit lecturer at the University of
Zululand, manager for special projects
at SARS, and cost and chemical analyst
at Shell & BP Lubricants. She currently
serves on the Boards of Kwezi Mining,
Thebe Investments and Gannet.
Mr Andrew Conway
Gaorekwe Molusi
BA (Journalism), MA
Appointed to the Board:
March 2011
Mr Molusi is a veteran of the
media industry in South Africa. He
serves on the Boards of African
Media and Entertainment, Caxton
CTP Printers and Publishers,
Johannesburg Tourism Company,
Rhodes University, Sishen Iron Ore
Company and Business Against
Crime SA. His numerous previous
Board directorships include Print
Media South Africa, Newspaper
Association, World Association of
Newspapers and South African Union
of Journalists.
Benny Mokaba
Foundations
for sustainability and
growth in place
Overview
Since this is my first report as Chairman of PetroSA, it is more of
an account of the efforts and diligence of my two predecessors,
Dr Popo Molefe and Advocate Linda Makatini. This is particularly
so in the case of Advocate Makatini, who acted as chair of the
Board for a large part of the year under review. The contribution
of both to PetroSA is highly appreciated. I am humbled by the
appointment and mandate to serve our country as chairman
of South Africa’s national oil company, in the midst of all the
challenges and opportunities ahead of us.
Despite a global environment fraught with challenges, While we are under no illusion about the enormity of
ranging from commodity price volatility and increased the socio-economic developmental needs of South
competition for hydrocarbon resources, through to Africa and the region, we believe that the company is
tightening climate and environmental constraints, PetroSA on a firm footing to make a meaningful contribution
was able to return to profitability in the year under review. to the cause of security of energy supply, job creation,
Poised to Enact Vision 2020 poverty alleviation and societal transformation.
President of South Africa, under review), the Executive Management team and all
staff members for their unrelenting efforts to make PetroSA
Jacob Zuma, and the a success. I wish to assure all stakeholders – both external
Minister of Energy, Dipuo and internal – that we intend to do our utmost to build this
organisation to be the leading African energy company.
Peters, at the GTL refinery Thank you.
in Mossel Bay. This was
the first such event in the
history of the company
and reaffirms the national
significance of PetroSA as
the national oil company. AMB Mokaba (PhD)
Mr Nkosemntu G Nika
CFO
BCom, BCompt (Hons), CA(SA), AMP
Appointed as an executive director: September 2003
Mr Nika was previously Executive Manager: Finance at the Development Bank
of Southern Africa. He has held various internal auditing positions at Eskom,
Shell and Anglo American Corporation Limited. He is a non-executive Board
member of the Industrial Development Corporation and chairs the Board Audit
Committee, and Governance and Ethics Committee.
EXECUTIVE MANAGEMENT
Dr Nompumelelo Siswana
Vice-president: Trading, Supply and Logistics
MSc, PhD (Chemical Engineering and Industrial Chemistry)
Dr Siswana has been in the oil and gas industry for more than 10 years, and has
held various positions in organisations such as BP (Southern Africa) and Engen
Petroleum Limited as well as in the former Department of Minerals and Energy.
Dr Siswana joined PetroSA in 2002 as General Manager: Corporate Planning,
Strategy and New Ventures. She was appointed to the position of Vice-president:
Trading Supply and Logistics In 2005. Dr Siswana resigned from PetroSA in
March 2011.
Mr Everton G September
Vice-president: New Ventures (Upstream)
BA, BCom, MBA
Mr September has been in the petrochemical business for more than 20 years,
mostly in marketing positions in South Africa, the United States and Europe. He
spearheaded a successful project to set up the PetroSA sales and marketing
office in Rotterdam, Holland. He joined PetroSA in 2003 and was appointed to his
current position in 2008.
Mr Darrin Arendse
Vice-president: Human Capital
B Admin, B Admin (Hons)
Mr Arendse began his career in the public sector as a generalist HR practitioner
in 1984. His career experiences have been shaped by serving in various senior HR
roles in organisations such as the City of Cape Town, De Beers and Standard Bank.
Mr Arendse joined PetroSA in February 2009.
Mr Joern Falbe
Vice-president: New Ventures (Midstream)
A Graduate in Chemical and Industrial Engineering, Technical University of
Hamburg, Germany
Mr Falbe formerly ran a highly integrated petrochemical and refinery complex
at Shell in Europe. He joined PetroSA in 2005 as Vice-president: Operations
and also represents PetroSA as a director in GTL.F1 AG, a joint venture with
Lürgi that seeks to commercialise the GTL technology. He was appointed to the
position of Vice-president: New Ventures (Midstream) in June 2007.
Returning to
profitability
despite challenging
environment
Yekani R Tenza
Overview
PetroSA operated throughout this financial year without
major incidents, achieving relative success on most
fronts. The company maintained its excellent safety
and environmental records, and made significant
strides towards its sustainability and growth ambitions,
continuing its drive for societal transformation.
A Return to Profitability
A key highlight this year was a return to profitability.
The company achieved a turnaround from a net loss of
R356 million in 2009/2010 to a net profit of R831 million.
R831 million
with some unseasonal, but timely rainfall, averted a
water supply crisis at the GTL refinery. Among the key
interventions was the construction of the country’s
President Jacob Zuma and Minister of Energy Dipuo Peters with members of the PetroSA Board and Executive in Mossel Bay
Ensuring Our Sustainability F-O field will also serve as an enabler of further
development of gas prospects near F-O, which could
Final Investment Decision for F-O Field
provide a further five year life for GTL refinery to 2025.
Our efforts to build and sustain the company continues.
Key to this is the sustainability of the GTL refinery in Seismic Acquisition Programme to Further
Mossel Bay. We are continuously searching for additional Derisk the F-O Field
gas reserves for the refinery and found proven gas reserves A seismic acquisition programme covering the greater
in the F-O field, which is located off the south coast of Block 9 area, including F-O, was embarked upon towards
South Africa. the end of the financial year. The aim of the programme is
to further derisk the F-O field and possibly identify other
This year, the project received a final investment decision
indigenous hydrocarbon prospects for future exploitation.
from the PetroSA Board. This implies that the development
of the F-O field has been sanctioned. Production from LNG and Shale Gas Other Possible Sustainability
this field is expected by 2013 and it is estimated that Measures
production from the F-O field, together with continued For the longer-term sustainability of PetroSA, the LNG
optimisation of existing fields, will maintain commercial project has been revived. The aim is to import LNG for use
operations to 2019/2020. The development of the as future supplementary feedstock for the GTL refinery.
Growing PetroSA and Ensuring Security of Processing Seismic Data in Block Q, Equatorial
Liquid Fuels Supply for South Africa Guinea
Considering Phased-in Options for Project Mthombo In Block Q, Equatorial Guinea, the processing and
interpretation of the 1 000 km2 seismic data acquired over
Consultations with the shareholder with respect to the
the block continued.
sanctioning of project Mthombo’s Front-End Engineering
and Design (FEED) study continued. The seismic data covers almost 50% of this block in which
we hold 75% technical operating interest. We are also
Our engagements with various stakeholders, including
looking at divesting up to 40% equity in the block.
the South African Petroleum Industry, have resulted in us
strengthening the original business case for this project Transforming the Company, the Sector and
and considering alternatives and other scenarios. We Society
expect a final decision on the project before the end of the An Increase in BEE Volumes
next financial year. We continued to make strides to support BBBEE,
Pursuing Downstream Acquisitions in particularly in preferential procurement. Our BEE volumes
Sub-Saharan Africa increased from 186 million litres in 2009/2010 to
Plans to participate in the South African downstream 212 million litres in 2010/2011. This translates to a 14%
increase in BEE sales from the previous year.
market were firmed up. Divestments by the international
oil companies from the downstream sub-Saharan market
presented us with additional opportunities to pursue our
downstream objectives.
14%
This year, we finalised the reserves quantification and
certification study in Venezuela’s Boyaca 4 Block. The
next step is for PetroSA and Petróleos de Venezuela S.A.
(PDVSA) – Venezuela’s national oil company – to jointly
work on a business plan for the development of this block.
increase in
We also evaluated a number of mature fields offered by BEE sales
PDVSA as part of the memorandum of understanding
between the companies. We are currently doing an
economic assessment of revitalising these fields.
R30 million
Women representation in the company remained unchanged
at 26% of the total workforce. Efforts are being made to
further empower and advance women. To this end, we
sponsored and led an industry-wide women empowerment in corporate
workshop. The focus was on identifying barriers to progress,
as well as creating opportunities to advance women.
social investment
Promoting a Value-based Culture in the Company
A company wide values driven leadership programme was
initiated to instil a high performance culture within the
organisation, underpinned by ethics and sound governance
principles.
Numerous Corporate Social Investment Initiatives
On the corporate social investment front, we made several
interventions and spent over R30 million in targeted and
sustainable investments.
Learners in some townships in the Vredenberg area in
Saldanha had no school until PetroSA, together with
the provincial government, intervened to provide the
Masiphathisane Primary School. Built for R22 million,
the school has over 800 learners, and is the only school
providing Xhosa lessons in this predominantly Afrikaans-
speaking community.
We continued our support of the University of
Johannesburg’s New Generation of Scholars programme.
This involved a R9 million grant over three years to support
black, in particular women, students, doing postgraduate
studies.
We are sponsoring the building of the KwaNonqaba
community centre to the tune of R13 million. Work on
this centre began this year under review. We also provided
a R2.125 million donation as part of the Healdtown
Restoration Project, and committed R8.5 million to the
Mossel Bay municipality for community projects. Received ISO 9001
Ensuring Safety, Health, Environment and Quality recertification. This
On the safety front, the well-being of the company’s
employees remained key. There were no fatalities and code is a world-class
15 non-permanent disabling injuries were recorded. This
translates to a disabling injury frequency rate of 0.39
certification system,
against a target of less than 0.4. benchmarked against
Three environmental incidents occurred in this period. One international excellence
related to the discharge to sea of effluent that did not
comply with permit conditions. The other two incidents
models
related to diesel that entered the storm water system and
was discharged with the storm water to the beach adjacent My thanks go to my colleagues on the Executive Committee
to the Voorbaai tankfarm. for their support and hard work and to the rest of our staff.
31%
Cash reserves increased by 18%, from R10 billion the previous
year to R11.8 billion in the period under review. Despite this,
investment income was lower as a result of declining market
rates during the year.
in revenue due to Operating margins increased by 105% due to the increase in
higher prices and revenue and a reduction in other operating expenditure. The
increase in sales reduction in operating expenditure was largely a result of the
once-off 4-well drilling campaign in PetroSA Egypt SE Warda in
the prior year. The effort was not successful commercially and
the block was subsequently relinquished in the current year.
Limited capital expenditure was incurred in the year under
review, as all efforts were geared towards the sustainability of
the GTL refinery.
Taxation
In November 2010, the tax legislation was amended
retrospectively to allow for a deduction of OP26 capital
expenditure in the 2008/2009 fiscal year.
19%
PetroSA paid off the long-term loans raised for the EM gas
field development resulting in an un-geared balance sheet at
31 March 2011. The optimal funding structure for the F-O gas
field development to ensure sustainability of the company’s
Mossel Bay operations is being considered. A long-term of total company spend on
gearing ratio of 30% to 40% is being targeted, in line with BEE suppliers with 25.1%
the group’s long-term strategy and growth initiatives.
black ownership
THE REPORT THAT FOLLOWS REVIEWS OUR PERFORMANCE AGAINST THESE FOUR
THE REPORT STRATEGIC
THAT FOLLOWS REVIEWS
PILLARS OUR2010/11
FOR THE PERFORMANCE AGAINST
FINANCIAL YEAR. THESE FOUR
STRATEGIC PILLARS FOR THE 2010/2011 FINANCIAL YEAR.
35%
production interruptions at the GTL plant, which resulted in an
increase in feedstock demand.
The GTL refinery production was 35% higher, an increase from
GTL refinery 5.3 million barrels of oil equivalent the previous year to 7.15 million
production barrels of oil equivalent in the year under review.
Product Supply
Curtailing Throughput to Ensure Long-term
We have reduced our Sustainability
throughput at the GTL This year, we adopted a production philosophy that curtailed
the GTL refinery throughput to about 60% of its capacity.
refinery as a strategic This was done to prolong commercial operations at the plant
measure towards until the start of supplementary feedstock production from the
F-O field in 2013. The F-O field development will start in 2012.
sustainability To supplement the reduced GTL refinery production and
ensure that the company was able to meet our obligations to
the market, we imported finished petroleum products. Diesel
import amounted to 425.889 m3 while 62.463 m3 of petrol
26%
was imported.
Optimising Storage Results in Reduced Storage
Costs and Higher Product Margins
feedstock Supply and distribution optimisation remained a key focus area
production for the company. The supply chains associated with the various
business streams were further rationalised through optimising
storage, thereby reducing storage costs. This had a positive
contribution on product margins.
Freight Savings and Higher Prices Result in Higher
Product Margins
As part of optimisation, PetroSA consolidated its shipping
contracts for supply to the Mediterranean markets and the Far
East. This resulted in freight savings, which, combined with
higher prices in this region, resulted in higher product margins.
Building an Efficient Electronic Data Interchange
System for Trading
The electronic data interchange system aims to facilitate trade
with other oil companies. The system continued to operate
increased
efficiently, with the turnaround between receiving orders from
customers, placing orders with oil industry trading partners
product margins for supply execution and billing of customers improving
of Chemicals) prescribed that chemicals sold with an annual accumulations and prospects in the South Coast, which are
tonnage of more than 1 000 mt per annum had to be being evaluated to define an exploration drilling programme
registered by 30 November 2010 in order to continue being to prove up additional gas resources that could be used as
sold in the EU. PetroSA successfully met all requirements for supplementary feedstock for the GTL refinery.
registration by October 2010. The next phase of the REACH
F-O Development Approved by Board
programme that is currently under way entails the drafting of
extended safety data sheets. Key among our evaluations is the F-O field development, over
which we have a 100% exploration right, and which received
Increase in Sales in European Union a final investment decision this year.
Our sales in the European Union grew by 20% year on year
Following the Board approval to go ahead with development
from 2009/2010 levels. Demand outstripped supply and
of this field, preparations to convert the exploration right
tanks ran dry by January 2011. The uncertainty and unrest in
to a production right were initiated. This will facilitate
the Middle East filtered through to Europe as higher crude
development drilling which is planned to start in 2012.
and commodity chemical prices resulted in higher net-backs
throughout the business. We estimate that production from the F-O field – which is
expected in 2013 – together with continued optimisation
The price of isopropanyl (IPA) remained above pre-crisis levels,
despite persistent problems in Greece, Ireland and Spain. This of existing fields, will maintain commercial operations to
worked well for PetroSA’s revenue base. Mosstanol L prices 2019/2020. The development of the F-O field will also serve
also rose in the period under review, but the benefit of the as an enabler of further development of gas prospects near
price increase could not be taken full advantage of due to F-O, which could provide a further five-year life for the GTL
limited supply. For a fourth consecutive year, the demand for refinery to 2025.
mosspar1925, the specialty distillate grade, was high and it On the next page is a schematic of the planned F-O field
was sold out by December 2010. development tied back to the existing infrastructure.
Exploration and Development Efforts in Seismic Acquisition Programme Embarked on
South Africa Towards the end of the financial year, we embarked on a
This year saw PetroSA continuing to evaluate gas potential seismic acquisition programme covering the greater Block 9
off the South and West Coasts. The go-ahead by the PetroSA area, including F-O. The aim of the programme is to further
Board on the F-O field off the South Coast enables PetroSA to derisk the F-O field and possibly identify other indigenous
begin preparations for drilling, planned to begin next year. In hydrocarbon prospects for future exploitation.
addition, significant work was done in the various blocks off
West Coast Exploration Shows Potential
the West Coast, which we believe hold great potential.
The West Coast holds great promise for the unlocking of gas
Evaluations on the South Coast Continue resources that could provide additional life to the PetroSA
The sustainability of PetroSA’s GTL refinery rests to a large GTL refinery, having the potential for both shallow- and deep-
extent on the exploration and development activities water oil and gas resources. The map on the next page shows
within the South Coast. There are several discovered gas PetroSA’s West Coast exploration acreage.
BLOCK 1:
SIGNIFICANT TECHNICAL WORK CONDUCTED
We have conducted significant technical work in Block 1, including completing acquisition, processing and inversion
studies of a 1 500 km2 3D seismic survey. We have also identified numerous leads and plays and preliminary well targets
have been proposed.
BLOCK 2A:
PROJECT IN A GAS DEVELOPMENT MARKETING PERIOD
A production right for Block 2A was signed in August 2009 where PetroSA holds a 24% stake in a joint venture with
Forest Oil (53.2%) and Anschutz (22.8%). At present the joint venture is in the gas development marketing period, which
is for five years, during which the work programme associated with the development plan will be suspended, allowing the
joint venture to:
• prove additional reserves through acquisition of 3D seismic data and by drilling wells;
• negotiate and sign a gas sales agreement; and
• review the construction of feasible gas infrastructure.
BLOCK 3A/4A:
NEW-ORDER RIGHTS SIGNED
New-order rights over block 3A/4A were signed in September 2010. With our joint-venture partners – BHP Billiton (60%)
and Sasol (10%) – we have reviewed past work in anticipation of the drilling of one well in the first exploration phase.
BLOCK 2C:
NEW-ORDER RIGHTS ON THE WAY
We have a 24% participating interest in Block 2C with our joint-venture partners Forest Oil (53.2%) and Anschutz
(22.8%). This is part of our strategy to gain acreage on the West Coast. Excellent progress has been made to convert the
exploration right to new-order rights over this block.
BLOCK 5/6:
TECHNICAL CO-OPERATION PERMITS STUDY UNDER WAY
PetroSA executed the second Technical Co-operation Permit over Block 5/6 on 8 July 2010. The objective of this 12-month
desktop study is to fully evaluate the oil and gas prospectivity of the block, in order to determine the commercial viability
of obtaining an exploration right.
PetroSA
Area Block Partners Operator Status
Equity
West Coast Block 1 100% PetroSA First exploration phase
Block 3A/4A 30% BHP Billiton, Sasol BHP Billiton First exploration phase
Block 9 Tracts
South Coast E-CB, E-AA, E-CN, 55% Pioneer PetroSA Initial exploration period
E-W, E-CC, E-AG
Succession
Planning
and
Management
Workforce
Planning
(Talent Job Design and Profiles Retention
Strategy
Demand)
Learning
Performance
and
Management
Development
Significant progress has been made with respect to This is both due to imbalances created by social engineering
transformation within the company. However, challenges in the past, which provided little opportunity for women to
remain with respect to increasing women representation at acquire the technical skills required in the industry, as well as
all levels, increasing the representation of people living with limited skills development opportunities currently offered to
disabilities and enterprise development.
women within the industry.
In the period under review the company’s BBBEE status was
The shortage of industry-specific skills amongst women
verified by Empowerdex, a SANAS-accredited verification
agency. The company’s BBBEE rating dropped from a level 2 in South Africa posed a challenge for PetroSA’s desire to
status previously to a level 3 contributor. This is attributed to increase women representation in the organisation. Women
little progress on employment equity, in particular women representation within the company, therefore, remains
representation and enterprise development. unchanged from the previous year, at 26% of the total
workforce. The company, however, remains committed to
EMPLOYMENT EQUITY identifying and developing women to actively participate
While we made significant progress regarding transformation throughout the liquid fuels industry value chain.
in the company in this financial year, we fell short in achieving
our goals around women representation and enterprise People Living with Disabilities
development. This accounts for our BBBEE status, as verified A disability awareness campaign was conducted in the year
by Empowerdex, a SANAS-accredited verification agency, under review, and resulted in 30 more employees disclosing
dropping from a level 2 status to a level 3 contributor.
their disability. The company has also, as part of its efforts to
Women Empowerment increase the representation of people living with disabilities,
The statistics on gender in the liquid fuels industry show identified and ring-fenced functions where vacancies could
an unequal picture between men and women in the sector. be filled by people living with disabilities.
Total
Foreign by Total Total
Male Female Nationals Level Black Female
Occupational
Levels A C I W A C I W Male Female
Professionally
qualified and
experienced 125 63 16 101 58 20 5 17 11 1 417 287 100
specialists and
mid-management
Skilled technical
and academically
qualified
workers, junior
179 216 11 205 90 75 4 47 1 828 575 216
management,
supervisors,
foremen and
superintendents
Semi-skilled and
discretionary 89 102 1 19 66 31 1 5 314 290 103
decision-making
Unskilled and
defined decision- 51 43 5 6 39 4 2 2 152 144 47
making
TOTAL
450 429 35 341 254 130 12 71 13 2 1 737 1 310 467
PERMANENT
Temporary
28 33 23 8 4 1 2 – – 99 74 15
employees
GRAND TOTAL 478 462 35 364 262 134 13 73 13 2 1 836 1 384 482
SKILLS DEVELOPMENT
PetroSA reviews the skills levels within the organisation on
an annual basis in order to align training and development
needs with its employment equity plan. Ongoing training
and development opportunities were afforded to employees
through various training institutions. R35.9 million was
spent on training and development including travel and
accommodation, in the period under review. The following
skills development initiatives were advanced:
R36 million
job and invariably their prospects for career growth. The
study assistance programme is open to all the company’s
employees for part-time tertiary studies. This ranges from
postgraduate studies in engineering, commerce, law and
various other fields of interest at any level, including starting
employee training and
from first year. development
34 PetroSA ANNUAL REPORT 2011
Leadership in Oil and Energy
The Leadership in Oil and Energy Certificate programme
offered by Wits Business School through SAPIA is aimed at
developing women leadership skills within the petroleum
industry. To date 30 PetroSA employees successfully David Maripane, PetroSA’s
completed the programme, with seven employees completing
the programme during 2010. intellectual property
High Performance Culture Academy
manager, is not shy to
The High Performance Culture programme played an important acknowledge the company’s
role in developing the functional management competencies generous support to him
needed within the organisation. The programme also served to
increase awareness of the importance of sound management
while he qualified as one
and leadership practices for business. The programme of the few black patent
consisted of a supervisory and management development
programme, with 16 employees completing the programme
attorneys in South Africa. “It’s
during the reporting period. This brought the number of payback time,” he says. “Now
PetroSA employees that have completed the programme to 57 that I am qualified, we at
over the three years of its existence.
PetroSA can register patents
Graduate-in-Training and In-service Training on our own.”
During the reporting period a total number of 23 graduates
joined PetroSA from several of its student development
programmes. These graduates were given a two-year fixed-
term contract within the various business areas, where they
will be mentored by skilled professionals depending on their
career of choice. The breakdown of the intake is as follows:
• Graduates-in-Training = 13
• Experiential learners = 10
Bursaries
Bursaries are offered to South African students from
previously disadvantaged communities to complete
undergraduate studies at South African tertiary institutions.
For the financial year 2010/2011 PetroSA’s bursary
programme consisted of a total number of 91 full-time The PetroSA Centre of
students in primarily the various fields of engineering, Excellence attempts to
geosciences and commerce. For 2010/2011 there were
no new intakes into the programme, with the objective address much-needed
of lowering the number and also with 13 of the students industry skills while
having graduated and being accommodated into the
Graduate-in-Training programme.
assisting the country to
Centre of Excellence
develop the skills needed.
The PetroSA Centre of Excellence (COE) in Mossel Bay is
In ten years, it has:
accredited by the Chemical Industry and Energy Training • qualified 732 learners
Authority (CHIETA) to provide learnerships, NQF Levels • trained 420 safety
2 – 4, and qualifications in the National Trade Test for
electricians, instrument mechanics, fitters, riggers, welders watchers
and boilermakers. • trained 258 mechanical
For the period under review the COE had an intake of 42 operators
new learners. This increased the total enrolment at the COE
to 172 learners. Established in 2002, the COE qualified
• trained 504 floggers
more than 732 learners to date. The COE has also trained
about 420 safety watchers, 258 mechanical operators and
504 floggers. These skills are primarily used by the industry
during their statutory shut-downs.
Toluene/
Reformate 92 920 74 697 0 0%
R200 million
community development
initiatives. We have spent over
in last five years R200 million in the past five
years.
Nature of business and principal activities Exploration for and production of oil and gas, refining
operations converting gas and gas condensate to liquid fuels
and petrochemicals and the marketing thereof
The reports and statements set out below comprise the annual report presented to the shareholders:
Page
Report of the Auditor-General 48
Directors’ Responsibilities and Approval 50
Statement on Corporate Governance 51
Performance Against Objectives 56
Value Added Statement 60
Directors’ Report 61
Report of the Board Audit Committee 68
Materiality and Significant Framework 69
Statement from Company Secretary 72
Statement of Financial Position 74
Statement of Comprehensive Income 75
Statement of Changes in Equity 76
Statement of Cash Flows 77
Accounting Policies 78
Notes to the Annual Financial Statements 90
The following supplementary information does not form part of the annual financial statements and is unaudited:
Fields in Production and Under Development 131
Definition of Financial Terms 133
Accounting Authority’s Responsibility for I believe that the audit evidence I have obtained is
the Financial Statements sufficient and appropriate to provide a basis for my
audit opinion.
The Board of Directors, which constitute the
accounting authority, is responsible for the preparation Opinion
and fair presentation of these consolidated and In my opinion, the consolidated and separate
separate financial statements in accordance with financial statements present fairly, in all material
South African Statements of Generally Accepted respects, the financial position of PetroSA as at
Accounting Practice (SA Statements of GAAP) and 31 March 2011, and its financial performance and
the requirements of the Public Finance Management cash flows for the year then ended in accordance
Act of South Africa No. 1 of 1999 (PFMA) and the with SA Statements of GAAP and the requirements of
Companies Act of South Africa No. 61 of 1973 and the PFMA and the Companies Act of South Africa.
for such internal control as management determines
necessary to enable the preparation of consolidated Emphasis of Matter
and separate financial statements that are free from I draw attention to the matter below. My opinion is
material misstatement, whether due to fraud or error. not modified in respect of this matter:
Auditor-General’s Responsibility Significant Uncertainties
As required by section 188 of the Constitution of the With reference to note 9 in the Directors’ Report of
Republic of South Africa No. 108 of 1996 and the financial statements, the Company has disposed
section 4 of the Public Audit Act of South Africa of Brass Exploration Unlimited during the financial
No. 25 of 2004 (PAA) and section 1E3 of the Central year. As this disposal is currently the subject of
Energy Fund Act of South Africa No. 38 of 1977, as litigation, the balances and transactions of this entity
amended, my responsibility is to express an opinion on continue to be consolidated as at period-end.
these consolidated and separate financial statements
Material Impairments
based on my audit.
As disclosed in note 8 to the financial statements,
I conducted my audit in accordance with material impairments to an intercompany loan account
International Standards on Auditing and General to the amount of R945 million was incurred due to its
Notice 1111 of 2010, issued in Government Gazette recoverability being doubtful. The loan amounting to
33872 of 15 December 2010. Those standards R270 million to PetroSA Gryphon Marin from PetroSA
require that I comply with ethical requirements and was written off as at 31 March 2011.
plan and perform the audit to obtain reasonable
assurance about whether the consolidated and Additional Matter
separate financial statements are free from material I draw attention to the matter below. My opinion is
misstatement. not modified in respect of this matter:
An audit involves performing procedures to obtain The “Value Added Statement”, “Fields in Production
audit evidence about the amounts and disclosures in and Under Development” schedule and the
the consolidated and separate financial statements. “Definition of Financial Terms” list, set out on
The procedures selected depend on the auditor’s page 60, pages 131 to 132 and pages133 to 136
judgement, including the assessment of the risks respectively of the financial statements, does not
The report is presented in terms of the Public Generally Accepted Accounting Practice (GAAP),
Finance Management Act No. 1 of 1999 (PFMA), including any interpretations of such Statements
as amended, and is focused on the financial results issued by the Accounting Practices Board, and the
and financial position of the Company information Companies Act, together with the Corporate Laws
pertaining to the Company’s state of affairs. Its Amendment Act. The annual financial statements are
business operations and performance against based on appropriate accounting policies consistently
predetermined objectives are disclosed elsewhere in applied and supported by reasonable and prudent
the annual report. judgements and estimates.
The directors acknowledge their responsibility for the The directors have no reason to believe that the
preparation, integrity and fair presentation of the Company will not be a going concern in the
annual financial statements and related information foreseeable future based on forecasts, available cash
included in the annual report. In order for the resources and ongoing support from the holding
directors to discharge these responsibilities, as well as company and has, for this reason, adopted the going
those bestowed on them in terms of the PFMA and concern basis in preparing the financial statements.
other applicable legislation, they have developed and
The annual financial statements have been audited by
maintain a system of internal control.
the Auditor-General who was given unrestricted access
Internal controls include a risk-based system of internal to all financial records and related data, including
accounting and administrative controls designed to minutes of all meetings of the shareholders, the Board
provide reasonable, but not absolute, assurance that of Directors and management. The directors believe
assets are safeguarded and that transactions are that all representations made to the independent
executed and recorded in accordance with generally auditors during their audit were valid and appropriate.
accepted business practice, as well as policies The Auditor-General’s report is attached.
and procedures established by the directors and
The annual financial statements for the year ended
independent oversight by the Board Audit Committee.
31 March 2011, which appear on pages 61 to 130,
The annual financial statements have been prepared were approved by the Board of Directors on
in accordance with South African Statements of 20 July 2011 and were signed on its behalf by:
Business Performance and Strategy The purpose of the BPSC is to ensure that the Company
Committee (BPSC) processes are aligned with the overall vision and
This committee is chaired by a non-executive director strategic direction, strategy management, business
and comprises non-executive directors appointed by management, capital investment, joint-venture
the Board. formations and performance measurement framework.
Composition of Board and Board Committees for the financial year under review
Risk
Business Management
Human Performance and
Board Audit Capital and Strategy Compliance
Committee Committee Committee Committee
Board (BAC) (HCC) (BPSC) (RMCC)
Non-executive Directors
Dr PS Molefe Chairman Member
Adv. L Makatini Acting Member
Chairman
Mr MB Damane Director Member Member
Prof. B Figaji Director Member Chairman Member
Mr DR Zihlangu Director Chairman Member
Mr MW Mkhize Director Member
Mr M Kajee Director Chairman Chairman
Ms BB Siwisa Director Member Member
Mr YR Tenza Director Member Member
Mr Z Mavuso Director
Dr ZR Rustomjee Director Member Member Member
Ms N Medupe Director Member Member
Dr AMB Mokaba Chairman
Mr ACG Molusi Director
Ms GN Jiyane Director
Ms FE Letlape Director
Mr MM Zwane Director
Executive Directors
Mr S Mkhize President Invitee Invitee Invitee Invitee
and CEO/
Director
Mr N Nika CFO/ Invitee Invitee Invitee Invitee
Director
A summary of The Petroleum Oil And Gas Corporation of South Africa (Pty) Limited Group's business performance
against objectives is contained in the table below:
Perform-
ance
Objective Key performance indicator Target Actual results
1. PEOPLE 1.1 Manage Talent
1.1.1 Employee Engagement 55% 72% Achieved
1.1.2 Implement Talent 50% Refer to note Achieved
Management Strategy implementation 1.1.2
1.2 Governance Framework
1.2.1 GMF Completion and Roll Completion of September 2010 Not achieved
Out GMF programme
by 31 July 2010
and development
of implementation
plan
2. FINANCE 2.1 Optimise Volumes
2.1.1 GTL Refinery Output 6.427 MMbbls 6.054 MMbbls Not achieved
2.1.2 Non-feedstock Production 1.198 MMbbls 1.26 MMbbls Achieved
2.2 Manage Profitability
Analysis
2.2.1 Gross Margin Percentage 23% 15% Not achieved
2.3 Managing Operating Costs
2.3.1 Actual vs Annual Budget Variance +5% 3% Not achieved
2.3.2 Actual vs Quarterly Forecast Variance ±15% 5% Achieved
3. STAKEHOLDER 3.1 Sustainable Corporate
Citizenship
3.1.1 Preferential Procurement 40% 53.4% Achieved
3.1.2 BEE Sales 5% increase 14% increase Achieved
1. PEOPLE 2. FINANCE
1.1 Manage Talent 2.1 Optimise Volumes
1.1.1 Employee Engagement 2.1.1 GTL Refinery Output
An engagement level of 55% was targeted. PetroSA The GTL refinery output was 6% below budget mainly
achieved an aggregated score of 72% on the employee due to lower volumes produced as a result of changes
engagement survey that was conducted in March 2011.
in the FEED composition and unplanned operational
The survey was targeted at employees who report
challenges at the plant and reduced throughput due to
directly to managers to measure employee satisfaction
lower feedstock availability.
with managers.
1.1.2 Implement Talent Management Strategy 2.1.2 Non-feedstock Production
1.1.2.1 Complete talent evolution project Non-feedstock production is mainly made up of
The talent evolution project was scoped to production from Oribi-Oryx. The actual production was
complete approximately 400 job profiles across the 5.1% above budget. This is mainly attributable to an
organisation. The job profiling project has been acid job that was done during the period under review.
successfully completed in November 2010 with
2.2 Managing Profitability Analysis
884 job profiles being completed.
2.2.1 Gross Margin Percentage
1.1.2.2 Implement Values Driven Leadership (VDL)
The gross margin percentage of 15% vs a target of
programme
23% was mainly due to:
The business was targeting 35% participation
and completion of the values driven leadership • the strength of the SA Rand against the US Dollar,
development programme (VDL) by eligible candidates which contributed to lower revenues; and
by 31 March 2011. The target group is EE occupational
levels 1 – 3 and this includes executives, senior and • lower volumes produced as a result of changes
middle management, professionals and specialists. In in the FEED composition and some operational
all, 30 employees attended an introductory session challenges at the plant.
to VDL in Mossel Bay. An additional 56 employees
2.3 Managing Operating Costs
attended a two-day workshop before the end of the
2010/2011 financial year. Additional workshops are 2.3.1 Actual Costs vs Annual Budget
scheduled for the new financial year. Operating costs were 3% below budget during the
period under review.
1.1.2.3 Roll out Talent Committees
The purpose of the Talent Committee Forums is 2.3.2 Actual vs Quarterly Forecast
to make objective, strategic decisions about the The actual total operating costs were 5% above the
sourcing, development, deployment and retention forecast.
of key talent to optimise performance and potential
and to minimise business risk. The outcome was that
3. STAKEHOLDERS
the Talent Committee structure was agreed upon
and presented to the business through conversations 3.1 SUSTAINABLE CORPORATE
in August 2010. Training of the Mancos on talent CITIZENSHIP
management was completed by end September 2010. 3.1.1 Preferential Procurement
1.2 Governance Framework For the period under review, PetroSA’s BEE
1.2.1 GMF Completion Roll out procurement expenditure of R1 368 485 298 equates
GMF will provide an approved governance manual, to 53.41% of the total discretionary procurement
brand strategy and integrated business process expenditure. This is a remarkable accomplishment for
system. The implementation plan was to be approved PetroSA given the industry charter requirements of
by the Board by 31 July 2010. 25% BEE participation across the value chain.
The value added statement measures performance in terms of value added by the Group through the collective
efforts of management, employees and the providers of capital. The statement shows how the value added has been
distributed to those contributing to its creation.
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
Revenue 10 821 890 8 623 259 10 761 756 8 440 627
Paid to suppliers for material and services (8 526 203) (8 251 913) (8 143 021) (8 531 445)
Income from investments 859 887 971 939 974 810 1 176 522
Wealth created 3 155 574 1 343 285 3 593 545 1 085 704
The directors present their annual report that forms part of the audited annual financial statements for the Group for
the year ended 31 March 2011.
1. DIRECTORS
The directors of the Company during the year and to the date of this report are as follows:
Name Appointed Resigned
Adv. L Makatini Non-executive (Acting Chairman)
Dr PS Molefe Non-executive (Chairman) 31 July 2010
Mr S Mkhize Executive (President and CEO) 24 August 2010
Mr N Nika Executive (Chief Financial Officer)
Mr MB Damane Non-executive
Prof. B Figaji Non-executive 31 July 2010
Mr DR Zihlangu Non-executive
Mr M Kajee Non-executive 9 March 2011
Ms BB Siwisa Non-executive 30 June 2010
Mr MW Mkhize Non-executive 3 November 2010
Dr ZR Rustomjee Non-executive
Mr Z Mavuso Non-executive
Mr YR Tenza Non-executive
Ms N Medupe Non-executive
Dr AMB Mokaba Non-executive (Chairman) 1 March 2011
Mr ACG Molusi Non-executive 1 March 2011
Ms GN Jiyane Non-executive 1 March 2011
Ms FE Letlape Non-executive 1 March 2011
Mr MM Zwane Non-executive 1 March 2011
2010/05/04
2010/05/25
2010/07/24
2010/08/14
2010/08/20
2010/09/27
2010/10/29
2010/11/18
2010/11/19
2011/02/01
2011/02/14
2011/02/24
1. DIRECTORS (CONTINUED)
Board Audit Committee
The committee consists of the following members and invitees:
Mr M Kajee Non-executive (Chairman) Resigned 9 March 2011
Mr YR Tenza Non-executive
Ms N Medupe Non-executive
Mr N Nika Executive
Dr ZR Rustomjee Non-executive Redeployed to committee as from 27 September 2010
Mr S Mkhize Executive Resigned 24 August 2010
Prof. B Figaji Non-executive (Chairman) Resigned 31 July 2010
2010/04/26
2010/05/14
2010/07/16
2010/10/26
2011/03/09
Attendance at meetings:
Mr M Kajee Y Y Y Y Y
Mr YR Tenza Y Y Y Y Y
Ms N Medupe Y Y Y Y N
Mr N Nika Y Y Y Y Y
Mr S Mkhize Y Y Y R R
Prof. B Figaji Y Y Y R R
Dr ZR Rustomjee – – – Y Y
Y = Attended meeting N = Apology received – = Not yet appointed R = Resigned from the Board
Due to the expiry of the terms of Board members, the Board Audit Committee, and Risk Management
and Compliance Committee were temporarily collapsed into one committee.
2010/07/23
2010/12/09
2011/02/09
Attendance at meetings:
Mr DR Zihlangu Y Y Y Y
Ms BB Siwisa Y R R R
Mr S Mkhize Y Y R R
Dr PS Molefe N Y R R
Mr MB Damane – – Y Y
Adv. L Makatini – – N Y
Y = Attended meeting N = Apology received – = Not yet appointed R = Resigned from the Board
Due to the expiry of the terms of Board members, two members were temporarily redeployed to this
committee.
2010/05/18
2010/07/19
2010/09/26
2011/02/11
Attendance at meetings:
Mr MB Damane N N N Y Y
Mr DR Zihlangu Y Y Y Y Y
Mr N Nika Y Y Y N Y
Dr ZR Rustomjee Y Y Y N RE
Mr MW Mkhize Y Y Y Y R
Prof. B Figaji Y Y Y R R
Mr S Mkhize Y Y N R R
Y = Attended meeting N = Apology received RE = Redeployed – = Not yet appointed R = Resigned from the Board
1. DIRECTORS (CONTINUED)
Board Risk Management and Compliance Committee
This committee of the Board of Directors consists of the following members and invitees:
Mr M Kajee Non-executive (Chairman) Resigned 9 March 2011
Mr N Nika Executive
Dr ZR Rustomjee Non-executive
Mr YR Tenza Non-executive Redeployed 27 September 2010
Ms N Medupe Non-executive Redeployed 27 September 2010
Prof. B Figaji Non-executive Term expired 31 July 2010
Ms BB Siwisa Non-executive Term expired 30 June 2010
Mr S Mkhize Executive Resigned 24 August 2010
2010/04/23
2010/07/16
2010/10/26
2011/03/09
Attendance at meetings:
Mr M Kajee Y Y Y Y
Mr N Nika Y Y Y Y
Dr ZR Rustomjee Y Y Y Y
Prof. B Figaji Y Y R R
Ms BB Siwisa Y R R R
Mr S Mkhize Y Y R R
Mr YR Tenza – – Y Y
Ms N Medupe – – Y N
Y = Attended meeting N = Apology received – = Not yet appointed R = Resigned from the Board
Due to the expiry of the terms of Board members, the Board Audit Committee, and Risk Management
and Compliance Committee were temporarily collapsed into one committee.
2. SECRETARY
The secretary of the Company is Adv. PSV Ngaba and her business and postal addresses are as follows:
Business address 151 Frans Conradie Drive
Parow
7500
Postal address Private Bag X5
Parow
7449
3. NATURE OF BUSINESS
Activities
The main areas of activity within the Group during the year are as follows:
• to focus on projects aimed at sustaining the GTL refinery through the securing of long-term feedstock
and cash flow maximisation;
treated as taxable subsistence allowances and The companies within the Group are subsidiaries
resulted in penalties of R3 602 057. Interest and whose existence are driven by business needs.
penalties for the late payment of VAT by PetroSA
The Brass Exploration Unlimited (BEU) financial year-end
Equatorial Guinea amounted to R16 394 611.
is 31 December in accordance with Nigerian legislation,
Damage to two outboard motors, on loan from
which is not in compliance with the PFMA requirements.
a supplier, which was not insured amounted to
The Group results include the performance of BEU
R228 142. Other fruitless and wasteful expenditure
for the year ended 31 December 2010. Pursuant to a
incurred by the Group amounts to R0.67 million.
PetroSA Executive Management and Board decision, the
The country manager in PetroSA Equatorial Guinea shareholders of BEU sold their share in the company in
incurred valid expenditure outside of his levels of order to dispose of its interest in Oil Mining Lease 114
authority, to the value of R12 427 417. This expenditure (OML114). The sale and purchase agreement for the
has subsequently been condoned. BEU shares was subject to a resolutive condition that
PetroSA is investigating irregularities in its corporate PetroSA and its subsidiary, in turn, sell their respective
social investment programme. Appropriate shareholding in PetroSA Nigeria, the legal owner of
disciplinary action has been taken and governance OML114. The purchase price of the BEU and PetroSA
processes are being tightened to prevent the Nigeria shares is the indivisible amount of US$55 million.
recurrence, as well as to maximise the benefits from The BEU sale closed on 22 February 2011 subject to
such investments. the sale of PetroSA Nigeria, which is expected to close
during the 2011/2012 financial year. The purchaser will
An employee stole money amounting to R16 673 manage and operate BEU, pending the closing of the
which was recovered from the final salary payout. In PetroSA Nigeria sale, as owners without any restrictions
2010, it was reported that interest on management or limitations, in exchange for which they have provided
fees charged to subsidiaries was fruitless and wasteful PetroSA with an appropriately extensive indemnity and
expenditure of R12 874 816. Subsequently, SARS parent company guarantee. In terms of the International
has ruled to waive such interest and the money will
Financial Reporting Standards (IFRS 5) the results and
be refunded. Total expenditure recovered during the
performance of these companies have been reflected
financial year is R12.9 million.
as a discontinuing operation in the Group financial
statements.
8. HOLDING COMPANY
The Company's holding Company is CEF (Pty) Moni Pulo Limited, our joint-venture partner, is
Limited incorporated in South Africa and the ultimate contesting the disposal of BEU and have approached
shareholder is the South African Government. the Nigerian High Court to obtain relief on the
All shares held by the government in CEF are not matter. PetroSA is defending its case and is confident
transferable in terms of the Central Energy Fund Act of success in this regard.
No. 37 of 1977. PetroSA holds 100% of the shares in PetroSA
North America. Due to declining sales volumes,
9. SUBSIDIARIES AND ASSOCIATES continuing with market development in the US would
The PetroSA Group structure has remained relatively be counter productive and therefore does not warrant
stable and is mostly driven by the Company’s pursuit PetroSA to have a physical presence in the US. As a
of exploration and production opportunities in Africa result, a decision was taken to close the PetroSA
and elsewhere in line with the Company’s objectives. North America office and exit the US market.
The Board Audit Committee has adopted formal terms • the information and explanations provided by
of reference as its Board Audit Committee Charter and management;
has discharged all its responsibilities as set out in the
charter. • Internal Audit reports; and
• the risk areas of the Company’s operations covered • unaudited and audited performance against
in the scope of internal and external audits; predetermined objectives;
• the reliability and integrity of financial information
• the management letter issued by the Auditor-
provided by management;
General of South Africa and management’s
• accounting and auditing concerns identified as a
response thereto; and
result of internal and external audits;
• the Auditor-General’s audit of the financial • significant adjustments resulting from the audit.
statements and the reports thereon; The Board Audit Committee confirms that in
• the activities of the Internal Audit function, discharging its responsibilities it has complied with
including its effectiveness, annual work the Companies Act No. 61 of 1973, as amended and
programme, co-ordination with the external
the Public Finance Management Act No. 1 of 1999.
auditors and the responses of management to
specific recommendations;
2. LEGAL AND REGULATORY
• the Company’s compliance with legal and
regulatory provisions; COMPLIANCE
• the independence and objectivity of the chief The Board Audit Committee concurs that the
internal auditor; adoption of the going concern premise is appropriate
in preparing the annual financial statements and
• the independence and objectivity of the Auditor-
General; has recommended the adoption of the financial
statements by the Board of Directors at their meeting
• the activities of the external auditors, including
effectiveness, its annual work programme and on 11 July 2011.
planned audit fees, co-ordination with the internal
auditors, the reports of significant investigations
and the responses of management to specific
recommendations; and
• the going concern assumptions and assessment
prepared by management.
The Board Audit Committee is satisfied that generally Ms GN Jiyane
an effective system of internal controls, including Chairman
internal financial controls, has been implemented and
maintained based on: 20 July 2011
The criteria for assessing the materiality and significant framework for The Petroleum Oil and Gas Corporation of
South Africa (Pty) Limited are contained in the table below:
QUALITATIVE QUANTITATIVE
1. MATERIAL DISCLOSURE OF INFORMATION TO THE MINISTER
Disclosure by the Facts that may influence the decisions or actions of Risks to the public
PetroSA Board of the stakeholders of a public entity. entity that may
material facts to the impact on the future
Minister of Minerals sustainability of the
and Energy entity or the Group
2. ANNUAL REPORT, FINANCIAL STATEMENT AND EXECUTIVE AUTHORITY DISCLOSURES
Material losses Criminal conduct: All expenditure
Expenditure that results from an illegal act,
fraudulent act and/or a criminal behaviour. All
instances will be fully disclosed to the Board Audit
Committee. Disclosures in the annual report and the
financial statements will be made for all losses due to
criminal conduct.
Irregular expenditure: All expenditure
Other than unauthorised expenditure, incurred in
contravention of or that is not in accordance with
the requirements of any applicable legislation.
Fruitless and wasteful expenditure: All expenditure
Made in vain and would have been avoided had
reasonable care been exercised.
3. BORROWINGS, GUARANTEE, INDEMNITY OR SECURITY
Borrowings, guarantees, indemnity or security must
be approved by the Board.
4. APPROVAL FROM THE ACCOUNTING AUTHORITY ON PARTICIPATION IN CERTAIN TRANSACTIONS
Significant partnership Approval from the executive authority is needed when < R467 000 000
capital at risk for PetroSA exceeds 2% of total assets.
Significant trust Approval from the executive authority is needed < R467 000 000
when funding of the trust exceeds 2% of total assets
of PetroSA.
Significant Approval from the executive authority is needed < R467 000 000
unincorporated joint when venture capital at risk for PetroSA exceeds 2%
venture of total assets.
Significant shareholding Approval from the executive authority is needed on < R467 000 000
acquisition and disposal of shareholding in a trading
company where PetroSA’s investment exceeds 2% of
total assets.
Significant assets Approval from the executive authority is needed on < R467 000 000
acquisition and disposal of any immovable property
such as land, buildings and movable assets when the
cost exceeds 2% of the total assets of PetroSA.
Significant business Approval from the executive authority is needed < R467 000 000
when commencement and cessation of a business
activity represents or will represent more than 2% of
PetroSA’s total assets.
QUALITATIVE QUANTITATIVE
4. APPROVAL FROM THE ACCOUNTING AUTHORITY ON PARTICIPATION IN CERTAIN TRANSACTIONS
(CONTINUED)
Significant change Approval from the executive authority is < R467 000 000
needed when engaging in new business that
is unrelated to the business and where the
investment exceeds 2% of total assets.
5. APPROVAL FROM CEF BOARD ON PARTICIPATION IN CERTAIN TRANSACTIONS
Significant partnership Approval from the CEF Board is needed when R467 000 001 < R655 000 000
capital at risk for PetroSA is exceeding 2% of
total assets.
Significant trust Approval from the CEF Board is needed when R467 000 001 < R655 000 000
funding of the trust is exceeding 2% of total
assets of PetroSA.
Significant Approval from the CEF Board is needed when R467 000 001 < R655 000 000
unincorporated joint venture capital at risk for PetroSA is exceeding 2%
venture of total assets.
Significant assets Approval from the CEF Board is needed on R467 000 001 < R655 000 000
acquisition and disposal of any immovable
property such as land and buildings, and
movable assets when the cost exceeds 2% of
the total assets of PetroSA.
Significant business Approval from the CEF Board is needed on R467 000 001 < R655 000 000
commencement and cessation of a business
activity that is representing or will be
representing more than 2% of PetroSA’s total
assets.
Significant change Approval from the CEF Board is needed when R467 000 001 < R655 000 000
engaging in new business that is unrelated to
the business and where the investment exceeds
2% of all assets.
6. APPROVAL FROM DOE/EXECUTIVE AUTHORITY AND INFORM NATIONAL TREASURY VIA CEF
Significant partnership Approval from the DOE/executive authority is > R655 000 000
needed when capital at risk for PetroSA exceeds
R655 million.
Significant trust Approval from the DOE/executive authority > R655 000 000
is needed when funding of the trust exceeds
R655 million.
Significant Approval from the DOE/executive authority is > R655 000 000
unincorporated joint needed when venture capital at risk for PetroSA
venture exceeds R655 million.
Significant assets Approval from the DOE/executive authority > R655 000 000
is needed on acquisition and disposal of any
immovable property such as land and buildings,
and movable assets when the cost exceeds
R655 million.
Significant business Approval from the DOE/executive authority is > R655 000 000
needed on commencement and cessation of a
business activity that is representing or will be
representing more than R655 million.
In my capacity as Company Secretary, I hereby confirm, in terms of section 268G(d) of the Companies Act No.
61 of 1973, that for the year ended, 31 March 2011, the Company has lodged with the Registrar of Companies
all such returns as are required of a company in terms of this Act, and that all such returns are, to the best of my
knowledge and belief, true, correct and up to date.
Group Company
2011 2010 2011 2010
Note(s) R’000 R’000 R’000 R’000
ASSETS
Non-current assets
Property, plant and equipment 2 7 240 534 6 657 675 7 238 126 6 653 384
Intangible assets 3 80 273 81 694 1 111 2 532
Deferred tax 5 – 72 478 – 72 478
Investments in subsidiaries 6 – – 6 279 5 787
Investments in associates 7 – – 23 490 23 490
Other financial assets 8 116 975 135 402 1 323 655 896 330
Amounts held by holding company 9 489 021 537 648 489 021 537 648
7 926 803 7 484 897 9 081 682 8 191 649
Current assets
Inventories 10 1 575 827 1 415 751 1 510 043 1 352 360
Current tax receivable 413 157 286 566 413 157 284 851
Trade and other receivables 12 2 070 344 1 788 367 2 072 184 1 754 863
Deferred tax – 286 – –
Cash and cash equivalents 13 11 852 498 10 027 026 11 795 852 9 979 415
15 911 826 13 517 996 15 791 236 13 371 489
Non-current assets held for sale and assets
of disposal groups 14 1 167 772 988 186 – –
TOTAL ASSETS 25 006 401 21 991 079 24 872 918 21 563 138
Liabilities
Non-current liabilities
Loans from Group companies 11 – – 1 –
Provisions 17 5 649 819 3 913 618 5 623 427 3 888 901
5 649 819 3 913 618 5 623 428 3 888 901
Current liabilities
Loans from Group companies 11 – – – 1 292
Loans from shareholders 16 – 17 991 – 17 991
Current tax payable 2 880 37 – –
Provisions 17 363 128 95 242 362 601 94 751
Trade and other payables 18 1 626 409 1 471 322 1 486 878 1 313 420
Bank overdraft 13 – 119 426 – 119 426
1 992 417 1 704 018 1 849 479 1 546 880
Liabilities of disposal groups 14 719 396 527 870 – –
Total liabilities 8 361 632 6 145 506 7 472 907 5 435 781
TOTAL EQUITY AND LIABILITIES 25 006 401 21 991 079 24 872 918 21 563 138
Group Company
2011 2010 2011 2010
Note(s) R’000 R’000 R’000 R’000
CONTINUING OPERATIONS
Revenue 19 10 565 385 8 090 168 10 565 042 8 088 421
Cost of sales (8 854 583) (7 580 057) (8 846 840) (7 571 866)
GROSS PROFIT 1 710 802 510 111 1 718 202 516 555
Other income 256 505 533 091 196 714 352 206
Operating expenses (1 903 505) (2 379 814) (1 509 532) (2 653 057)
OPERATING PROFIT (LOSS) 20 63 802 (1 336 612) 405 384 (1 784 296)
Investment income 22 859 887 971 939 974 810 1 176 522
Finance costs 23 (422 534) (397 532) (422 530) (397 259)
PROFIT (LOSS) BEFORE TAXATION 501 155 (762 205) 957 664 (1 005 033)
Taxation 24 308 519 348 634 312 897 349 173
PROFIT (LOSS) FROM CONTINUING
OPERATIONS 809 674 (413 571) 1 270 561 (655 860)
DISCONTINUED OPERATIONS
Profit for the year from discontinuing
operations 14 21 681 57 120 – –
PROFIT (LOSS) FOR THE YEAR 831 355 (356 451) 1 270 561 (655 860)
OTHER COMPREHENSIVE INCOME:
Exchange differences on translating foreign
operations (32 159) (131 719) 2 093 5 767
TOTAL COMPREHENSIVE INCOME
(LOSS) 799 196 (488 170) 1 272 654 (650 093)
Foreign
Total currency
Share Share share translation Retained Total
capital premium capital reserve income equity
R’000 R’000 R’000 R’000 R’000 R’000
GROUP
Balance at 1 April 2009 2 2 755 934 2 755 936 76 874 13 500 933 16 333 743
Changes in equity
Total comprehensive loss for the
year – – – (131 719) (356 451) (488 170)
Total changes – – – (131 719) (356 451) (488 170)
Balance at 1 April 2010 2 2 755 934 2 755 936 (54 845) 13 144 482 15 845 573
Changes in equity
Total comprehensive income for
the year – – – (32 159) 831 355 799 196
Total changes – – – (32 159) 831 355 799 196
Balance at 31 March 2011 2 2 755 934 2 755 936 (87 004) 13 975 837 16 644 769
Note 15 15 15
COMPANY
Balance at 1 April 2009 2 2 755 934 2 755 936 (7 718) 14 029 232 16 777 450
Changes in equity
Total comprehensive loss for the
year – – – 5 767 (655 860) (650 093)
Total changes – – – 5 767 (655 860) (650 093)
Balance at 1 April 2010 2 2 755 934 2 755 936 (1 951) 13 373 372 16 127 357
Changes in equity
Total comprehensive income for
the year – – – 2 093 1 270 561 1 272 654
Total changes – – – 2 093 1 270 561 1 272 654
Balance at 31 March 2011 2 2 755 934 2 755 936 142 14 643 933 17 400 011
Note 15 15 15
Group Company
2011 2010 2011 2010
Note(s) R’000 R’000 R’000 R’000
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash generated (utilised) by operations 25 862 967 (1 069 883) 1 183 924 (208 537)
Interest income 859 886 971 939 973 087 1 176 522
Dividends received 1 – 1 723 –
Dividend paid 26 – (375 000) – (375 000)
Finance costs (2 561) (18 713) (2 561) (18 440)
Tax received (paid) 27 257 536 (11 429) 257 069 (9 315)
Cash flows of held for sale/discontinued
operations 28 33 621 503 478 – –
NET CASH FROM OPERATING
ACTIVITIES 2 011 450 392 2 413 242 565 230
The most recent audited annual financial statements The Group treats transactions with non-controlling
of associates, joint ventures and subsidiaries are used interests as transactions with equity owners of the
where available, which are all within three months Group. For purchases from non-controlling interests,
of the year-end of the Group. Adjustments are made the difference between any consideration paid and
to the financial results for material transactions and the relevant share acquired of the carrying value of
events in the intervening period. Losses in excess of net assets of the subsidiary is recorded in equity.
the Group’s interest are not recognised unless there is Gains or losses on disposals to non-controlling
a binding obligation to contribute to the losses. interests are also recorded in equity.
1.6 Exploration, Evaluation and Research costs are recognised in profit or loss when
Development of Oil and Gas Wells incurred.
(continued) Development costs are capitalised only if they result
Exploration and Evaluation Costs in an asset that can be identified, it is probable that
All costs relating to the acquisition of licences, the asset will generate future economic benefits
exploration and evaluation of a well, field or and the development cost can be reliably measured.
exploration area are initially capitalised. Directly Otherwise it is recognised in profit or loss.
attributable administration costs and interest payable
are capitalised in so far as they relate to specific
1.8 Impairment of Non-financial Assets
development activities. At each reporting date, the Group reviews the
carrying amounts of its tangible and intangible
These costs are then written off as exploration costs in the
assets to determine whether there is any indication
statement of comprehensive income unless commercial
that those assets may be impaired. If such indication
reserves have been established or the determination
exists, the recoverable amount of the asset is
process has not been completed and there are no
estimated in order to determine the extent of the
indications of impairment.
impairment loss (if any). Where it is not possible to
Assets Pending Determination estimate the recoverable amount for an individual
Exploratory wells that discover potentially commercial asset, the recoverable amount is determined for the
reserves are capitalised pending a decision to further cash-generating unit to which the asset belongs.
develop or a firm plan to develop has been approved. Value in use is estimated taking into account future
These wells may remain capitalised for three years. cash flows, forecast market conditions and the
If no such plan or development exists or information expected lives of the assets.
is obtained that raises doubt about the economic or
operating viability then these costs will be recognised If the recoverable amount of an asset (or cash-
in the profit or loss of that year. If a plan or intention generating unit) is estimated to be less than its
to further develop these wells or fields exists, the carrying amount, its carrying amount is reduced
costs are transferred to development costs. to the higher of its recoverable amount and zero.
Impairment losses are recognised in profit or loss.
Development Costs Subsequent to the recognition of the impairment
Costs of development wells, platforms, well equipment loss, the depreciation or amortisation charge for the
and attendant production facilities are capitalised. The asset is adjusted to allocate its remaining carrying
cost of production facilities capitalised includes finance
value, less any residual value, over its remaining
costs incurred until the production facility is completed
useful life.
and ready for the start of the production phase. All
development wells are not depreciated until production If an impairment loss is subsequently reversed, the
starts and then they are depreciated on the units of carrying amount of the asset (or cash-generating unit)
production method calculated using the estimated is increased to the revised estimate of its recoverable
proved and probable reserves. amount, but limited to the carrying amount, that
would have been determined had an impairment loss
Dry Wells
not been recognised in prior years. A reversal of an
Geological and geophysical costs, as well as all other costs
impairment loss is recognised in profit or loss.
relating to dry exploratory wells costs are recognised in
the profit and loss in the year they are incurred. 1.9 Leases
1.7 Intangible Assets Finance leases are recognised as assets and liabilities
An intangible asset is an identifiable non-monetary at the lower of the fair value of the assets and the
asset without physical substance. present value of the minimum lease payments at the
date of the acquisition. Finance costs represent the
Intangible assets are initially recognised at cost if difference between the total leasing commitments
acquired separately or internally generated or at fair and the fair value of the assets acquired. Finance
value if acquired as part of a business combination. costs are charged to the profit and loss over the term
If assessed as having an indefinite useful life, the of the lease at the interest rates applicable to the
intangible asset is not amortised but tested for
lease on the remaining balance of the obligations.
impairment annually and impaired if necessary. If
assessed as having a finite useful life, it is amortised Rentals payable under operating leases are recognised in
over its useful life using a straight-line basis and profit or loss on a straight-line basis over the term of the
tested for impairment if there is an indication that it relevant lease where significant or another basis if more
may be impaired. representative of the time pattern of the user’s benefit.
COMPANY
Land 26 645 – 26 645 16 715 – 16 715
Production assets 19 861 937 (16 295 126) 3 566 811 18 873 930 (15 632 034) 3 241 896
Furniture, fittings,
office equipment and
vehicles 577 618 (426 110) 151 508 572 984 (351 592) 221 392
Restoration costs 1 889 355 (582 124) 1 307 231 601 029 (582 123) 18 906
Shutdown costs
capitalised 461 705 (307 804) 153 901 461 705 (153 902) 307 803
Assets under
development 2 032 030 – 2 032 030 2 846 672 – 2 846 672
Total 24 849 290 (17 611 164) 7 238 126 23 373 035 (16 719 651) 6 653 384
A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is
available for inspection at the registered office of the Company.
Restoration expenditure relates to the provision for restoration costs and is amortised on a units-of-production
basis over the expected useful life of the reserves.
PetroSA entered into an agreement with the Mossel Bay Municipality to jointly construct a desalination plant in
Mossel Bay. PetroSA’s portion has been included as an asset under construction. Total spend at 31 March 2011
amounts to R53 million (excluding VAT).
The units-of-production method is used in calculating depreciation on producing assets. Due to the nature of the
business the gas and oil reserves at the end of each financial year differs from the previous year. This necessitates
a change in the estimated remaining useful lives of these producing assets at the end of each financial year. The
effect on the current year is an increase in profit of R232 million and the effect on profits in future years is 2012:
R148 million (2013: R41 million; 2014: R17 million; 2015 – 2020: loss of R420 million).
COMPANY
Software 5 573 (4 462) 1 111 5 573 (3 041) 2 532
COMPANY
Exploratory wells – – – – – –
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
6. INVESTMENTS IN SUBSIDIARIES
The carrying amounts of subsidiaries are
shown net of impairment losses.
Shares
Balance at the beginning of the year – – 0.12 0.12
Loans – – (0.12) (0.12)
Shares – – 0.12 0.12
Carrying amount of investment – – – –
Shares
Balance at the beginning of the year – – 0.12 0.12
Loans – – (0.12) (0.12)
Shares – – 0.12 0.12
Carrying amount of investment – – – –
Shares
Balance at the beginning of the year – – 0.07 0.07
Dissolution of subsidiary – – (0.07) –
Balance at the end of the year – – – 0.07
Loans – – – (0.07)
Shares – – – 0.07
Carrying amount of investment – – – –
Shares
Balance at the beginning of the year – – 0.10 0.10
Loans – – (0.10) (0.10)
Shares – – 0.10 0.10
Carrying amount of investment – – – –
Shares
Balance at the beginning of the year – – 1 235 1 235
Loans – – 1 913 1 421
Shares – – 1 235 1 235
Carrying amount of investment – – 3 148 2 656
Share premium
Balance at the beginning of the year – – 2 965 2 965
Shares – – 166 166
Share premium – – 2 965 2 965
Carrying amount of investment – – 3 131 3 131
Shares
Balance at the beginning of the year – – 0.06 0.06
Loans – – (0.06) (0.06)
Shares – – 0.06 0.06
Carrying amount of investment – – – –
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
6. INVESTMENTS IN SUBSIDIARIES
(CONTINUED)
COMPANY
GTL.F1 AG Switzerland 37.50% 37.50% 23 490 23 490
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
8. OTHER FINANCIAL ASSETS
LOANS AND RECEIVABLES
GTL.F1 AG 30 367 31 031 30 367 31 031
This loan is interest free and has no fixed
repayment terms.
Lürgi 86 608 104 371 86 608 104 371
The amount owing by Lürgi is in respect of
a purchase of 12.5% share in the PetroSA
Statoil Joint Venture. The loan accrues interest
at EUROBOR +0.75%. The loan is repayable
based on dividends receivable by Lürgi from
the GTL.F1 AG technology company.
Brass Exploration Unlimited – – – –
The loan to Brass incurs interest at LIBOR
+14% and has no fixed repayment terms.
PetroSA Equatorial Guinea – – 1 206 680 759 980
The loan has no fixed repayment terms and
interest accrues at prime +2%.
PetroSA Sudan – – – –
The loan has no fixed repayment terms and
interest accrues at prime +2%.
PetroSA North America – – – 949
The loan for PetroSA North America also has
no fixed repayment terms and accrues interest
at LIBOR +2%.
PetroSA Egypt – – 945 158 990 351
The loan has no fixed repayment terms and
interest accrues at prime +2%.
PetroSA Gryphon Marin – – – 261 341
The loan has no fixed repayment terms and
interest accrues at prime +2%.
SUBTOTAL 116 975 135 402 2 268 813 2 148 023
LOANS AND RECEIVABLES (IMPAIRMENTS) – – (945 158) (1 251 693)
116 975 135 402 1 323 655 896 330
During the year, a decision was taken to write off PetroSA’s loan to PetroSA Gryphon Marin due to its
irrecoverability. PetroSA has impaired its loans to PetroSA Egypt of R945 million (2010: R990 million and 2010:
PetroSA Gryphon Marin for the value of R261 million), due to their recoverability being doubtful.
PetroSA has subordinated the loans to various subsidiaries in favour of other creditors of the above-mentioned
companies until such time as the assets fairly valued exceed the liabilities.
10. INVENTORIES
The amounts attributable to the different
categories are as follows:
Petroleum fuels 923 146 733 128 923 146 733 128
Work-in-progress 84 276 82 226 84 276 82 226
Consumable stores, spares and catalysts 568 405 600 397 502 621 537 006
1 575 827 1 415 751 1 510 043 1 352 360
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
12. TRADE AND OTHER RECEIVABLES
(CONTINUED)
RECONCILIATION OF PROVISION FOR
IMPAIRMENT OF TRADE AND OTHER
RECEIVABLES
Opening balance 50 964 48 076 50 958 48 070
Impairment losses recognised on receivables 12 495 3 894 12 495 3 888
Written off (11 409) – (11 403) –
Amounts recovered during the year (2 282) (1 006) (2 282) (1 000)
49 768 50 964 49 768 50 958
Issued
1 914 ordinary par value shares of R1 each 2 2 2 2
Share premium 2 755 934 2 755 934 2 755 934 2 755 934
2 755 936 2 755 936 2 755 936 2 755 936
Non-current liabilities – – – –
Current liabilities – 17 991 – 17 991
– 17 991 – 17 991
17. PROVISIONS
RECONCILIATION OF
PROVISIONS:
GROUP – 2011
Utilised
Opening during Interest Change
balance Additions the year expense in estimate Total
R’000 R’000 R’000 R’000 R’000 R’000
Abandonment/Environment 3 565 595 1 737 – 419 969 1 518 956 5 506 257
Post-retirement medical aid
benefits 343 345 80 868 (280 625) – – 143 588
Rehabilitation provision 7 500 – – – – 7 500
Bonus 92 420 373 207 (110 025) – – 355 602
4 008 860 455 812 (390 650) 419 969 1 518 956 6 012 947
RECONCILIATION OF
PROVISIONS:
GROUP – 2010
Abandonment/Environment 3 600 400 30 178 – 292 273 (357 256) 3 565 595
Post-retirement medical aid
benefits 300 230 45 287 (2 172) – – 343 345
Rehabilitation provision 7 500 – – – – 7 500
Bonus 104 306 71 110 (82 996) – – 92 420
4 012 436 146 575 (85 168) 292 273 (357 256) 4 008 860
RECONCILIATION OF
PROVISIONS:
COMPANY – 2011
Abandonment/Environment 3 540 914 – – 419 969 1 518 956 5 479 839
Post-retirement medical aid
benefits 343 345 80 868 (280 625) – – 143 588
Rehabilitation provision 7 500 – – – – 7 500
Bonus 91 893 372 705 (109 497) – – 355 101
3 983 652 453 573 (390 122) 419 969 1 518 956 5 986 028
RECONCILIATION OF
PROVISIONS:
COMPANY – 2010
Abandonment/Environment 3 577 642 28 255 – 292 273 (357 256) 3 540 914
Post-retirement medical aid
benefits 300 230 45 287 (2 172) – – 343 345
Rehabilitation provision 7 500 – – – – 7 500
Bonus 104 306 70 583 (82 996) – – 91 893
3 989 678 144 125 (85 168) 292 273 (357 256) 3 983 652
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
Non-current liabilities 5 649 819 3 913 618 5 623 427 3 888 901
Current liabilities 363 128 95 242 362 601 94 751
6 012 947 4 008 860 5 986 028 3 983 652
REHABILITATION PROVISION
This amount is for the rehabilitation of the land at the Voorbaai terminal.
BONUS
The provision is for incentives for PetroSA employees who qualify in terms of their individual as well as company
performance during the financial year.
19. REVENUE
Gross revenue represents the invoiced value
of crude oil, fuel sales and other goods and
services supplied, excluding value added tax.
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
20. OPERATING PROFIT (LOSS)
Operating profit (loss) profit for the year is
stated after accounting for the following:
INCOME FROM SUBSIDIARIES
Administration and management fees 323 369 2 238 14 756
OPERATING LEASE CHARGES
Premises
• Contractual amounts 5 820 4 340 2 426 1 927
Motor vehicles
• Contractual amounts 16 9 – –
Equipment
• Contractual amounts 49 38 – –
5 885 4 387 2 426 1 927
Deferred
Benefit of unrecognised tax loss 317 890 189 721 317 890 190 041
Movement of deferred tax (245 411) (181 556) (245 412) (181 556)
72 479 8 165 72 478 8 485
(308 519) (348 634) (312 898) (349 173)
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
25. CASH GENERATED FROM (USED IN)
OPERATIONS
Profit (loss) before taxation 501 155 (762 205) 957 664 (1 005 033)
ADJUSTMENTS FOR:
Depreciation and amortisation 902 091 707 492 900 198 705 519
Notional interest (419 969) (292 273) (419 969) (292 273)
Dividends received (1) – (1 723) –
Interest received (859 886) (971 939) (973 087) (1 176 522)
Finance costs 422 534 397 532 422 530 397 259
Impairment loss (reversal) – 355 (36 693) 1 235 780
Movements in provisions 2 004 087 (3 576) 2 002 376 (6 026)
Movement in restoration costs (1 288 325) 60 532 (1 288 325) 60 532
Foreign exchange (gain) loss (111 753) (192 843) (77 501) (55 370)
Transfer of property, plant and equipment – 53 436 – 53 436
CHANGES IN WORKING CAPITAL
(Increase) decrease in inventories (160 076) 89 762 (157 683) 46 561
(Increase) decrease in trade and other
receivables (281 977) 190 324 (317 321) 181 022
(Decrease) increase in trade and other payables 155 087 (346 480) 173 458 (353 422)
862 967 (1 069 883) 1 183 924 (208 537)
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
31. CONTINGENCIES
GUARANTEES
1. The Group has issued guarantees in favour
of financial institutions in respect of housing
loans granted by such institutions to
employees of the Group amounting to – 969 – 969
2. The Group’s share of 55% of costs being
US$3.356 million would be payable
from PetroSA’s share of revenues from
any future production within the E-P
tract should the tract be successful, thus
representing a contingent liability. 22 766 24 581 22 766 24 581
3. The Group has issued guarantees in favour
of a financial institution in respect of
vehicle loans granted by such institution to
employees of the Group amounting to – 957 – 957
4. The Group has issued guarantees for the
rehabilitation of land disturbed by mining
on the Sable field, amounting to 180 000 180 000 180 000 180 000
5. The Group has issued performance bonds
in favour of the Egyptian General Petroleum
Corporation in respect of minimum
work obligations required for exploration
operations in Egypt (US$17.7 million) – – – –
6. The Group has issued performance
guarantees in favour of the Republic of
Equatorial Guinea in respect of minimum
work obligations required for exploration
in Equatorial Guinea (US$18 million) 122 107 131 841 122 107 131 841
7. The Group has issued a parent company
guarantee in favour of Aban Abraham
in respect of rig hire for PetroSA
Equatorial Guinea for US$24.4 million
valid until 15 March 2010 – – – –
CLAIMS
PetroSA is considering settling a claim made by
a former employee 1 092 600 1 092 600
PetroSA is considering settling a claim made in
terms of a contract 13 225 – 13 225 –
14 317 600 14 317 600
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
32. COMMITMENTS
AUTHORISED CAPITAL EXPENDITURE
Approved by the directors
Contracted for 1 924 174 2 321 129 1 924 174 2 321 129
Not contracted for 9 814 029 1 049 859 9 814 029 1 049 859
11 738 203 3 370 988 11 738 203 3 370 988
PetroSA Egypt
– within one year 184 1 070 – –
– in second to fifth years inclusive 148 – – –
332 1 070 – –
Office space was leased for employees in
Cairo. The lease has a three-year period from
1 January 2010 to 31 December 2012 with a
monthly lease payment of U$2 000, payable
six months in advance. The lease payments
will escalate annually on 1 January by 10%.
PetroSA North America
– within one year – 335 – –
– in second to fifth years inclusive – – – –
– 335 – –
Office space was leased at Lyric Centre Office Building, 440 Louisiana Street, Houston, Harris County, Texas, 77002.
The effective starting date was 1 December 2007 and the lease period is 36 months with a monthly payment of
US$4 251.99 and US$4 425.99 and an escalation of 0.692% linked to the increase in taxes, operating expenses
and utility costs.
2010
Total foreign currency
Liabilities
GBP3 389 11.1007 Less than three months
As at 31 March 2011, a 10% relative change in the USD to the ZAR would have impacted profit and loss for
the year by R1.5 million (2010: R0 million).
As at 31 March 2011, a 10% relative change in the GBP to the ZAR would have impacted profit and loss for the
year by R0 million (2010: R0.004 million).
CREDIT RISK
Financial assets, which potentially subject the Group to concentrations of credit risk, pertain principally to trade
receivables and investments in the South African money market. Trade receivables are presented net of the
allowance for doubtful debts.
The exposure to credit risk with respect to trade receivables is not concentrated due to a large customer base.
The Group manages counterparty exposures arising from money market and derivative financial instruments
by only dealing with well-established financial institutions of a high credit rating. Losses are not expected as a
result of non-performance by these counterparties.
Credit limits with financial institutions are revised and approved by the Board quarterly.
MATURITY PROFILE
The maturity profiles of financial assets and liabilities at the reporting date are as follows:
Less than Between one Over five Non-interest
one year and five years years bearing Total
R’000 R’000 R’000 R’000 R’000
Group
At 31 March 2011
Assets
Cash 11 852 498 – – – 11 852 498
Loans receivable – – 86 608 30 367 116 975
Trade and other receivables 2 070 344 – – – 2 070 344
Total financial assets 13 922 842 – 86 608 30 367 14 039 817
Liabilities
Trade and other payables 1 626 409 – – – 1 626 409
At 31 March 2010
Assets
Cash 10 027 026 – – – 10 027 026
Loans receivable – – 104 371 31 031 135 402
Trade and other receivables 1 788 367 – – – 1 788 367
Total financial assets 11 815 393 – 104 371 31 031 11 950 795
Liabilities
Trade and other payables 1 471 322 – – – 1 471 322
Interest-bearing borrowings 17 991 – – – 17 991
Bank overdrafts 119 426 – – – 119 426
Total financial liabilities 1 608 739 – – – 1 608 739
At 31 March 2010
Assets
Cash 9 979 415 – – – 9 979 415
Loans receivable – – 865 299 31 031 896 330
Trade and other receivables 1 754 863 – – – 1 754 863
Total financial assets 11 734 278 – 865 299 31 031 12 630 608
Liabilities
Trade and other payables 1 313 420 – – – 1 313 420
Interest-bearing borrowings 17 991 – – – 17 991
Bank overdrafts 119 426 – – – 119 426
Total financial liabilities 1 450 837 – – – 1 450 837
LIQUIDITY RISK
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash resources
are available to meet cash commitments.
PRICE RISK
External sales and purchases are subject to price and basis risks associated with volume and timing differences.
At 31 March 2010
Fixed rate
Cash and cash equivalents (7.76%) 2 951 199 – – 2 951 199
Cash on deposit (7.09%) 537 648 – – 537 648
Floating rate
Cash and cash equivalents (8.03%) 5 558 804 1 350 000 – 6 908 804
Bank overdraft (1.22%) 119 426 – – 119 426
Foreign loan – USD (0.92%) (17 991) – – (17 991)
Trade and other receivables 1 754 863 – – 1 754 863
Trade and other payables (1 313 420) – – (1 313 420)
PetroSA Gryphon Marin (12%) – – 261 341 261 341
Lürgi (3.63%) – – 104 371 104 371
PetroSA Egypt (12%) – – 990 351 990 351
PetroSA North America (2.92%) – – 949 949
GTL.F1 AG (0%) – – 31 031 31 031
PetroSA Equatorial Guinea (12%) – – 759 980 759 980
FINANCIAL ASSETS
As at 31 March 2011 a 10% relative change in the:
• ZAR interest rate would have impacted profit and loss for the year by R90 million (2010: R89 million)
• EURIBOR interest rate would have impacted profit and loss for the year by R0.38 million (2010: R0.39 million)
• USD LIBOR interest rate would have impacted profit and loss for the year by R0 million (2010: R0.002 million)
FINANCIAL LIABILITIES
As at 31 March 2011 a 10% relative change in the USD LIBOR interest rate would have impacted profit and loss
for the year by R0 million (2010: R0.016 million; 2009: R0.26 million).
MARKET RISK
The Group’s activities expose it primarily to the financial risks of changes in commodity prices and foreign
currency exchange rates. Refer to note 33 for foreign currency risk management and price risk management.
GROUP – 2010
Loans receivable – 135 402 135 402
Other financial assets 537 648 – 537 648
Trade and other receivables 1 788 367 – 1 788 367
Cash and cash equivalents 10 027 026 – 10 027 026
12 353 041 135 402 12 488 443
COMPANY – 2010
Loans receivable – 896 330 896 330
Other financial assets 537 648 – 537 648
Trade and other receivables 1 754 863 – 1 754 863
Cash and cash equivalents 9 979 415 – 9 979 415
12 271 926 896 330 13 168 256
GROUP – 2010
Trade and other payables 1 471 322 – – 1 471 322
COMPANY – 2011
Trade and other payables 1 486 878 – – 1 486 878
COMPANY – 2010
Trade and other payables 1 313 420 – – 1 313 420
Non-executive
directors
Adv. L Makatini 670 – – – 236 – – 906
PS Molefe 165 – – – 22 – – 187
MB Damane – – – – 59 – – 59
Prof. B Figaji 211 – – – 7 – – 218
DR Zihlangu 604 – – – 198 – – 802
M Kajee 452 – – – 25 – – 477
BB Siwisa 78 – – – 18 – – 96
MW Mkhize – – – – 55 – – 55
ZR Rustomjee 378 – – – 78 – – 456
Z Mavuso – – – – 63 – – 63
YR Tenza 377 – – – 129 – – 506
N Medupe 290 – – – 78 – – 368
Total 3 225 – – – 968 – – 4 193
Bonuses
and Compen- Expatri-
perform- Pension Other sation ate
Salary/ ance contri- contri- Acting for loss allow-
Fee payments butions butions allowance of office ance Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Executive
Management
E September 1 722 230 295 123 – – – 2 370
N Siswana 2 046 278 133 68 15 – – 2 540
G Sweto 1 699 240 113 96 – – – 2 148
JEP Falbe 2 104 373 145 200 – – 604 3 426
D Arendse 1 575 165 180 84 – – – 2 004
Total 9 146 1 286 866 571 15 – 604 12 488
Non-executive
directors
PS Molefe 535 – – – 159 – – 694
Prof. B Figaji 405 – – – 38 – – 443
BB Siwisa 355 – – 57 – – 412
N Vukuza-Linda 36 – – – 7 – – 43
DR Zihlangu 505 – – – 120 – – 625
MW Mkhize – – – – 80 – – 80
MB Damane – – – – 95 – – 95
YR Tenza 208 – – – 45 – – 253
Z Mavuso – – – – 26 – – 26
M Kajee 502 – – 58 – – 560
CWN Molope 198 – – – 31 – – 229
ZR Rustomjee 202 – – – 38 – – 240
N Medupe 80 – – – 15 – – 95
A Nkuhlu 116 – – – 48 – – 164
L Makatini 50 – – – 15 – – 65
Total 3 192 – – – 832 – – 4 024
Payment
Bonuses for con-
and version to Compen- Expatri-
perform- Pension Other fixed- sation ate
Salary/ ance contri- contri- term for loss allow-
Fee payments butions butions contracts of office ance Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Executive
management
D Marokane 1 294 216 137 149 – – – 1 796
E September 1 574 307 216 134 1 766 – – 3 997
N Siswana 1 903 307 124 65 – – – 2 399
G Sweto 1 395 245 93 95 – – – 1 828
JEP Falbe 2 505 254 134 193 – – 560 3 646
D Arendse 1 179 – 149 96 – – – 1 424
Total 9 850 1 329 853 732 1 766 – 560 15 090
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
37. RELATED PARTIES (CONTINUED)
Eskom Group
Services received/rendered 357 461 277 178 357 461 277 178
Product 410 167 75 651 410 167 75 651
Rental 599 744 599 744
Storage 29 400 24 411 29 400 24 411
Trade receivable 32 055 159 32 055 159
Telkom
Services received/rendered 11 232 12 803 11 232 12 803
SARS
Payments 3 409 160 2 622 342 3 409 160 2 622 342
Tuinroete Agri
Services received/rendered 70 68 70 68
Revenue 8 2 13 11 7 4
Expenses (308) (92) (752) (820) (620) (468)
Net profit (loss) (300) (90) (739) (809) (613) (464)
Percentage holding/tracts
55% 55% SCG 55% 60% 24% 24%
E-CC Capex E-P Sable Block 2A Block 2C
2011
R’000
Current assets 90 998 – 45 935 54 793 –
Total assets 90 998 – 45 935 54 793 –
Current liabilities 39 – – – – –
Retained income (125 916) (2 039 455) (39 965) (1 441 585) (184 503) (10 091)
Company
contribution to
venture 125 967 2 040 453 39 965 1 487 520 239 296 10 091
Total liabilities 90 998 – 45 935 54 793 –
25.5%
Zambezi
Block
2011
R’000
Retained income (183 926)
Company contribution
to venture 183 926
Total liabilities –
Partners: Petronas
42.50%
ENH
15%
Petrobras
17%
Nature of project Exploration
Revenue 9 3 22 28 7 35
Expenses (189) (79) (1 377) (1 748) (326) –
Net profit (loss) (180) (76) (1 355) (1 720) (319) 35
Percentage holding/tracts
55%
55% SCG 55% 60% 24% 24%
E-CC Capex E-P Sable Block 2A Block 2C
2010
R’000
Current assets 166 998 – 72 703 54 793 –
Revenue 35 7 032 – – – –
Expenses (28) – (3 256) 8 006 (5 789) (504)
Net profit (loss) 7 7 032 (3 256) 8 006 (5 789) (504)
Partners: Nakor
70%
Energulf
10%
BHP BHP BHP Namcor
Billiton Billiton Billiton 7%
60% 75% 75% Kunene
Pioneer Sasol Pioneer Mitsui Mitsui Energy
45% 10% 45% 15% 15% 3%
Nature of project Exploration Exploration Exploration Exploration Exploration Exploration
22.50%
Zambezi
Block
2010
R’000
Production facilities 1
Retained income (183 926)
Company contribution
to venture 183 926
Total liabilities –
Partners: Petronas
42.5%
ENH
15%
Petrobras
17%
Nature of project Exploration
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
39. PUBLIC FINANCE MANAGEMENT
ACT (PFMA)
FRUITLESS AND WASTEFUL EXPENDITURE
Standing time of transport vehicles – 9 – 9
Flight missed – 2 – 2
Penalties and interest paid to tax authorities 20 718 13 133 4 323 13 133
Interest on late payment of invoices 96 26 96 26
Penalties and interest for late payment of
cargo dues 114 20 114 20
Penalties and interest on settlement of dispute – 1 960 – 1 960
Cancellation fee 1 – 1 –
Addition travel costs 4 – 4 –
Overpayment of vendor 22 – 22 –
Damage to outboard motors 228 – 228 –
Unauthorised event 25 – 25 –
Penalties and interest on CCMA award 77 – 77 –
Irrecoverable study assistance 31 – 31 –
Interest on late payment of investment 122 – 122 –
Penalties on outstanding cost recovery reports 67 – – –
Additional registration fees 114 154 – –
21 619 15 304 5 043 15 150
Refer to page 65 to 66 of the Directors’ Report
for further details. The appropriate corrective
and/or disciplinary actions have been taken
(where necessary).
FRUITLESS AND WASTEFUL EXPENDITURE
MOVEMENT
Incurred during the year 21 619 15 304 5 043 15 150
Recovered during the year (12 977) – (12 977) –
Recognised as income (expense) during the
year (8 642) (15 304) 7 934 (15 150)
Closing balance – – – –
IRREGULAR EXPENDITURE
Contravention of Company policy 13 602 309 1 175 309
Contravention of legislation 3 350 – 3 350 –
16 952 309 4 525 309
Group Company
2011 2010 2011 2010
R’000 R’000 R’000 R’000
40. COMPARATIVE FIGURES
Certain comparative figures in the notes to the
Group annual financial statements have been
reclassified.
The effects of the reclassification are as
follows:
STATEMENT OF FINANCIAL POSITION
Sundry receivables (1 393 919) – (1 393 919) –
Trade payables 1 393 919 – 1 393 919 –
Accrued leave pay 956 – – –
Accrued expenses (956) – – –
Group Company
Crude oil/ Crude oil/
Condensate Condensate
MMbbl Gas Bscf MMbbl Gas Bscf
2011 2011 2010 2010
1. MOVEMENT IN NET REMAINING PROVED
AND PROBABLE RESERVES
At the beginning of the year 3.60 57.80 6.50 106.10
Revisions of previous estimates – – 0.60 (14.00)
Production (2.60) (45.00) (3.50) (34.30)
Additions 7.40 536.10 – –
At the end of the year 8.40 548.90 3.60 57.80
NOTES
Oil
Fields in production and under development comprise the Oribi (100%) and Oryx (100%) oil fields.
Gas
Fields in production and under development comprise the SCG (55%), F-A and F-A Satellite, E-M and E-M Satellite
and F-O gas fields respectively.
Fields under appraisal comprise discoveries. The reserves shown are either all oil or all gas, excluding gas liquids.
Oil includes condensate and LPG.
Reserves and production are shown on a working interest basis (100%).
Oil and gas reserves cannot be measured exactly since the estimation of reserves involves subjective judgement
and arbitrary determinations and therefore all estimations are subject to revision. The gas and oil reserves reflected
above have been determined by an independent surveyor.
DEFINITIONS
Proved reserves
Oil
Means the amount of petroleum which geophysical, geological and engineering data indicate to be commercially
recoverable to a high degree of certainty. For the purposes of this definition, there is a 90% chance that the actual
quantity will be more than the amount estimated as proved and a 10% chance that it will be less.
Gas
Means the amount of gas which geophysical, geological and engineering data indicate to be commercially
recoverable to a high degree of certainty. For the purposes of this definition, there is a 90% chance that the actual
quantity will be more than the amount estimated as proved and a 10% chance that it will be less.
The supplementary information presented does not form part of the annual financial statements and is unaudited
The supplementary information presented does not form part of the annual financial statements and is unaudited
Below is a list of definitions of financial terms used in the CASH FLOW HEDGE
annual report of PetroSA (Pty) Limited and the Group:
A hedge of the exposure to variability in cash flows
ACCOUNTING POLICIES that is attributable to a particular risk associated with
an asset, or a liability that could affect profit or loss
The specific principles, bases, conventions, rules and
or a highly probable forecast transaction that could
practices applied in preparing and presenting annual
affect profit or loss.
financial statements.
CHANGE IN ACCOUNTING ESTIMATE
ACCRUAL ACCOUNTING
An adjustment to the carrying amount of an asset,
The effects of transactions and other events are
liability or the amount of the periodic consumption
recognised when they occur rather than when the
of an asset that results from new information or new
cash is received.
developments.
The supplementary information presented does not form part of the annual financial statements and is unaudited