Taking over the top job at the Central Energy Fund in the midst of a major restructuring exercise can only be described as a major challenge.

CEO Dr Renosi Mokate, who has been at the helm of the organisation for two years, says it has indeed been a tough challenge which has taken longer than planned.

The origins of the CEF go back to 1964 with the formation of the Strategic Fuel Fund (SFF) to procure and store crude oil for South Africa's transport needs. Its primary task was to source petroleum for the country after sanctions were applied to the then apartheid government.

Since then, it has diversified its needs and services to become a multi-disciplinary organisation in the energy sector covering all forms of energy provision. It has a wide mandate which covers the chain from exploration right through to distribution.

Mokate, who was chosen for the post of CEO from a field of high calibre candidates, was seen as the right person to lead the CEF Group in the new century after its turbulent and rather tainted past. She came to the group from a background in both academia and business and formerly worked as an executive director for the Human Sciences Research Council in South Africa. She also previously served on the board of Soekor.

Currently, the CEF's core purpose is to provide South Africa with a reliable supply of crude oil and locally produced hydrocarbons.

This is achieved primarily by SFF's procurement and storage of crude oil, oil and gas exploration through what was previously Soekor, the offshore production and on-shore synfuels operations of Mossgas, undertaking fuels-based research and development projects and providing a range of complementary products and services for the country's fuel industry.

Says Mokate: "You have within the CEF group a range of companies that were established for strategic reasons that made sense at the time. But we needed to look at the whole conglomeration again and see what would make sense now."

CEF operates in terms of a mandate given it by the government. Key considerations in carrying out this mandate include sustainability and profitability to generate dividends for its share- holder - the government.

The restructuring of the group is intended to separate the state's strategic, regulatory and commercial activities.

A key part of the restructuring has been the amalgamation of exploration company Soekor, gas-to-liquids producer Mossgas and parts of the SFF into one company - PetroSA. This highly complex process, which has taken several years, is almost complete.

The cabinet decided last year that PetroSA would take the lead in evaluating the potential of west coast gas.

Large reservoirs of gas have been located off the coast of Namibia (the Kudu gas field), the west coast of South Africa (the Ibhubezi field where Forest Oil is involved in partnership with South African empowerment company Mvelaphanda), the south-east coast around Mossel Bay and off Mozambique on the east coast of Africa where gas is being sourced for South Africa from the Pande and Temane fields.

South Africa currently relies on coal for nearly 70 percent of its primary energy needs but is already examining alternative energy sources to deal with a surge in future demand.

"We know there is gas. The issue is what is the volume and the undertaking to develop this into commercial reality," says Mokate. Anchor customers are required to make this energy source viable. Mossgas is a natural market for gas off the South African coast while Sasol is an anchor customer with the Mozambique project.

The Cape Power Project, which aims to use natural gas for domestic energy needs, may be a forerunner in this regard, according to reports. The $700 million project would entail piping natural gas down the west coast to Cape Town.

In 1998, Soekor was given the man- date to explore beyond South Africa and has been looking at opportunities in the rest of Africa and the Middle East in countries such as Nigeria, Gabon, Algeria, Libya and Egypt.

Nigeria is a main supplier of crude oil (Bonny Light) to South Africa as is Iraq (Basrah Light).

Mokate is excited about the role the CEF can play in the field of renewable energy.

The organisation is looking at renewable energy, energy efficiency, low smoke fuels projects (focusing on developing and marketing products, mainly coal-based products, that have lower carbon emissions when burned), among other things.

Mossgas is looking at making more environmentally friendly gas-to-liquids products from an emission point of view by lowering the sulphur content.

"We have decided to become active in the area of solar energy and in deriving energy from waste." She says the CEF will also look at ways of delivering energy to communities not connected to the national grid. "We will look for technical partners and manufacturing partners in the solar energy sector to enable communities to gain access to solar energy. We will seek to mobilise funding by providing some equity and also through loan and grant funding."

The CEF has set up the Energy Development Division which will be responsible for all areas that fall under the new mandate of sustainable energy.

Currently, the CEF has a number of active subsidiaries. These are:

• PetroSA: The core business is the manufacture of gas to liquids and oil and gas exploration. The subsidiary was formed in July 2000 when the operations of Soekor and Mossgas were merged to create critical mass and combine their synergies at various ends of the value chain. PetroSA is looking further downstream for opportunities in the petrochemical sector for its gas to liquids manufacturing process
• SFF: This was established by the previous government to manage the country's strategic stocks and acquire crude oil stocks for local refineries. Its main storage terminal is situated at Saldanha Bay which can hold up to 45 million barrels. South Africa aims, at any one time, to have 35 days' supply of fuel (the equivalent of 14-million barrels). This need became apparent last year when a fire broke out at Sasolburg's Natref refinery which resulted in emergency shipments of refined fuel to the country to counter resulting fuel shortages.

  Certain functions have been moved from SFF, including crude oil trading and tank terminal management, to PetroSA to create greater efficiencies;

• Sud Chemie Zeolites Sudeliene: A partnership between the CEF and a German company formed in the early 1990s. It focuses on the production of COD catalysts that are used for procedures such as those employed by Mossgas but it also offers opportunities in other petroleum production processes. The CEF's current 30 percent stake in this company (down from 60 percent previously) is warehoused for black empowerment participation;
• Enerkom: A research and development facility which holds a number of patents centred around the oxidation of coal products which have applications in the pharmaceutical and agricultural sectors. The division takes these patents through to commercial use.

  However, the CEF is in the process of disinvesting from this division as it does not fit in with the company's core business. It is looking at the agricultural sector to take over this component of the business.

• I-Gas acts as an official agent for the state for the development of the hydro- carbon gas industry in South Africa and to get involved in gas infrastructure development such as pipelines. It is a partner in the Mozambique -South Africa gas pipeline development;
• Petroleum Agency of South Africa (PASA): Formerly a division of Soekor, it was established as an independent agency in 1998 responsible for marketing off- shore exploration opportunities to international companies and to manage the country's region- al exploration data.

The agency negotiates leases and agreements on behalf of the state. It is also responsible for the Upstream Training Trust, established by the industry for the upliftment of South Africans in the fields of science and engineering.

Mokate says the agency has been successful in attracting companies to opportunities in South Africa. There are currently six international companies involved in this sector and more are signing up to explore for oil and gas.

This initiative has been boosted by the fact that energy has been identified as a cornerstone of the New Partnership for Africa's Development (Nepad), she says. "South Africa is one of the few countries in Africa that has exploration and production capabilities. This provides it with opportunities to partner national oil companies in providing expertise in that area, and to invest in other African countries."

She says any pan-African initiatives will need to centre around indigenous companies in African countries such as Sonatrech in Algeria.

"There is a basis for a lot more collaboration and hopefully the Nepad framework will provide the impetus for this to happen more and more. Already these kinds of discussions are happening in Africa."

She says the South Africa- Mozambique project is an important example of cross- border co-operation for energy projects. Another area in which other African countries have been engaged is the Petroleum Agency of South Africa. Some national oil companies have similar functions within the national oil company but not as a stand-alone entity.

She says the agency has engaged a number of national oil companies on the continent, including Algeria, Namibia and Mozambique, sharing information and sharing the capacity of PASA for finding opportunities.

"The CEF feels it must be playing a role in Africa in line with our mandate but we need to do it in context. We need to engage in commercial activities in a way that is going to be commercially viable."

Black economic empowerment is a key strategy for the CEF in South Africa. Mokate identified three ways to develop empowerment:

• Contributing to the development of human resources in the sector, which includes training.
• Procurement, where affirmative action requirements are taken into account when awarding procurement contracts. Mokate predicted that there would be an increasing focus in this regard in terms of the activities of PetroSA.

"We need to evolve businesses that will support these activities and support them by structuring the procurement process to give them that opportunity." She said this could be done without com- promising the needs of the group but cautioned that black empowerment companies should also not be put into a position where they might fail. "We need to work with them. Patience and commitment are needed."