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82 PETROSA Annual Report 2008

Country of incorporation SouthAfrica

Nature of business Explorationforandproductionofoilandgas,refiningoperationsconvertinggasandgascondensatetoliquidfuelsandpetrochemicalsandthemarketingthereof.

Directors DrPSMolefe

MrSMkhize

MrNGNika

MrANkuhlu

MrMBDamane

Prof.BFigaji

MrDRZihlangu

MsCWNMolope

MsNYVukuza‑Linda

MsBBSiwisa

MrMKajee

MrMWMkhize

Business address 151FransConradieDrive

Parow

7500

Holding company CEF(Proprietary)Limited

incorporatedinSouthAfrica

Bankers StandardBankofSouthAfricaLtd

Auditor Auditor‑General

Secretary AdvPSVNgaba

Company registration 1970/008130/07

Corporate Information

THe fuTure IS Now ... VISIoN 2020

PETROSA Annual Report 2008 83

Thereportsandstatementssetoutbelowcomprisethegroupannualfinancialstatementspresentedtotheshareholder:

PageStatementofcorporategovernance 84‑88Reportoftheboardauditcommittee 89Materialityandsignificantframework 90Performanceagainstobjectives 91‑96Valueaddedstatement 97Statementofresponsibility 98ReportoftheAuditor‑General 99‑100Companysecretary’scertificate 101Reportofthedirectors 102‑106Balancesheets 107Incomestatements 108Statementsofchangesinequity 109Cashflowstatements 110Notestotheannualfinancialstatements 111‑155Keytoabbreviations 156

Thefollowingsupplementaryscheduledoesnotformpartofthefinancialstatements,andisunaudited.

Supplementarydisclosureofreserves 157‑158

Contents

for the year ended 31 March 2008


1. Introduction

CorporategovernanceatPetroSAreflectsanattitudepremisedonethosratherthanamerestatement.Thegrouphasaformalisedsystemofcorporategovernancethatisacatalystforimprovedcomplianceandenhancedperformance.ThePetroSAgroupiscommittedtotheprinciplesoftransparency,integrityandaccountabilityasadvocatedbytheKingCommitteeReportonCorporateGovernanceforSouthAfrica2002(KingII),aswellasProtocolonCorporateGovernanceinthePublicSector.

Keyinitiativesundertakentoensurecomplianceandgoodcorporategovernance:

AnannualreviewoftheBoardcharterandtermsofreferenceofBoardcommittees;AnannualevaluationoftheperformanceofPetroSAboardofdirectors;Puttinginplacethepolicyondirectorsaccesstoindependentprofessionaladvice;AnnualupdateofPetroSAlevelsofauthoritymatrix;CompilationandannualreviewofacomprehensiveBoardinductionpack;DevelopmentofaPetroSAsubsidiaryshareholdercompact;andEnsuringthatBoardmembersarecontinuouslyexposedtotrainingoncorporategovernanceanddevelopmentswithintheindustry.

2. Governing bodies

2.1. Board of directorsThegrouphasaunitaryboardstructuremadeupofamajorityofnon‑executivedirectors,appointedbytheshareholder.Theboardofdirectors(theBoard)meetsatleastonceeveryquarter,andexecutivemanagersattendbyinvitation.TheBoardchargesexecutivemanagementwithregardtotheday‑to‑dayrunningofbusiness,withtheBoardaddressingarangeofkeyissuestoensurethatitretainsthestrategicdirectionof,andpropercontrolover,thegroup.Thenon‑executivedirectorsareappointedonathree‑year

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cycleandreappointmentisnotautomatic.TheofficesoftheChairpersonandChiefExecutiveOfficerareseparate.InaccordancewiththePublicFinanceManagementAct(ActNo1of1999)theboardistheaccountingauthorityofPetroSA.InkeepingwiththerecommendationsoftheKingReport,theBoardadoptedaboardcharterthatsetsouttheroleoftheBoardasfollows:TheBoard’sprimaryresponsibilitiesincludetheappointmentoftheCEO,determiningthecompany’sobjectivesandvaluesandgivingstrategicdirectiontothecompany,takingeffectiveandappropriatestepstoensurethatkeyriskareasandkeyperformanceindicatorsofthecompany’sbusinessareidentified,monitoringtheperformanceofthecompanyagainstagreedobjectives,advisingonsignificantfinancialmattersandreviewingtheperformanceofexecutivemanagementagainstdefinedobjectivesandapplicableindustrystandards,aswellas:

Approvingkeypolicies,investments,riskmanagementandrelevanttransactionsthatexceedmanagement’slevelsofauthority;Reviewingandapprovingthecompany’sstrategy,objectives,andplans;Consideringandapprovingannualfinancialstatementsandsubmissionstotheshareholder;Ensuringadherencetogoodcorporategovernanceandethics;Monitoringanddirectingtriplebottomlineperformance;andReviewingeffectivenessofcontrols.

2.2. Company SecretaryTheCompanySecretaryprovidestheboardofdirectorswithguidanceandadviceonmattersofbusinessethicsandgoodgovernance,aswellasthenatureandextentoftheirdutiesandresponsibilitiesandhowsuchdutiesandresponsibilitiesshouldbeproperlydischarged.EachoftheDirectorshasunrestrictedaccesstotheadviceandservicesoftheCompanySecretarialTeam,companyinformation,andisentitledtoseekindependentprofessional

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statement of

Corporate Governance



advice,attheCompany’sexpenseinpursuanceoftheirdutiesasdirector.

2.3. Board committeesTheBoardestablishedseveralcommitteestoassistitinthedischargeofitsduties.Eachcommitteeoperateswithinthedefinedtermsofreferenceandischairedbya

non‑executivedirector.

Board audit committee (BAC): Theauditcommitteeconsistsofnon‑executivedirectorsappointedbytheboardofdirectors.Thiscommitteemeetsatleastfourtimesperyearandischairedbyanindependentnon‑executivedirectorwhoisnottheChairpersonoftheBoard.TheAuditor‑GeneralandChiefInternalAuditorhaveunrestrictedaccesstothecommitteeandattendauditcommitteemeetings.Appropriateexecutivemanagers,includingthoseresponsibleforfinanceandinternalaudit,attendthesemeetingsbyinvitation.Theauditcommitteereviewstheadequacyandeffectivenessofinternalcontrolsofthegroupwithspecialreferencetothefindingsofbothinternalandexternalauditors.Areascoveredincludethereviewofimportantaccountingandcontrolissues,materialpendinglitigation,specificdisclosuresintheannualfinancialstatementsandareviewoftheperformanceoftheInternalAuditdepartment.

Board human capital committee (HCC): Thiscommitteeischairedbyanon‑executivedirectorandcomprisesnon‑executivedirectorsappointedbytheboard.ThePresidentandCEOandtheVice‑President:HumanCapitalattendthecommitteemeetingsbyinvitation.Thiscommitteereviewsandrecommendsannualremunerationincreases,termsandconditionsofemployment,thepaymentofincentivesandbonuses,generalfringebenefits,humancapital‑relatedpoliciesandtheappointmentofseniorstaffatanexecutivelevel.

risk management and compliance committee (rMCC):TheRMCCisresponsibleforidentifyingandensuringthatallcommongroupriskdenominators,weaknessesandopportunitiesareidentifiedandmanagedonagroup‑widebasis.Thiscommitteeischairedbyanindependentnon‑executivedirectorandcomprisesnon‑executivedirectorsappointedbytheBoard.Whilstitisimportantthatseniormanagement(withintheirdivisions)manageriskasbeingintegraltobusinessprocesses,itisvitalthatthemanagementofrisklinkstotheoverallstrategyanddirectionofPetroSA.TheoverallPetroSAriskpolicyensuresthatopportunitiesareidentifiedandduplicationofriskmanagementeffortisavoided.ThecommitteeassiststheBoardinreviewingtheriskmanagementprocessandthesignificantrisksfacingPetroSA,andinprovidingafocalpointforreportingonwiderriskissuestotheboard.

Business performance and strategy committee (BPSC):Thiscommitteeischairedbyanon‑executivedirectorandcomprisesnon‑executivedirectorsappointedbytheboard.ThepurposeoftheBPSCistoensurethatcompanyprocessesarealignedwiththeoverallvisionandstrategicdirection,strategymanagement,businessmanagement,capitalinvestment,jointventureformationsandperformancemeasurementframework.



Composition of Board and Board Committees for the financial year under review:

Board Board Audit committee

Human capital

committee

Business performance

& strategy committee

risk management & compliance

committee

Non‑executive directors: Board BAC HCC BPSC rMCC

DrPSMolefe Chairman Member

MrMBDamane Director Member

ProfBFigaji Director Member Member Member

MrANkuhlu Director Member Chairman

MrDRZihlangu Director Chairman Member

MsCWNMolope Director Chairman

MrMKajee Director Member Chairman

MsNVukuza‑Linda Director Member

MsBBSiwisa Director Member

MrMWMkhize Director Member

MrRJAngel(Resigned) Director Member

MrNHGumede(Resigned) Director Member

MsTCPChikane(Resigned) Director Chairman Member Member

MsRJHuntley(Resigned) Director Member Chairman

executive directors:

MrSMkhize PresidentandCEO/Director

Invitee Invitee Invitee Invitee

MrNGNika CFO/Director Invitee Invitee Invitee

Corporate Governancestatement of



3. Directors’ responsibility for the annual financial statements

Thedirectorsofthecompanyareresponsibleforthegroupannualfinancialstatementsandotherinformationpresentedintheannualreport.TheAuditor‑Generalisresponsibleforperforminganindependentauditoftheannualfinancialstatements.

TheannualfinancialstatementsandnotestheretoarepreparedinaccordancewithSouthAfricanStatementsofGenerallyAcceptedAccountingPractice(GAAP).Accountingpoliciesareconsistentlyappliedexceptwhereotherwisestated,inwhichcasefulldisclosureofchangesismade.Thedirectorsbelievethatthecompanyandgroupwillcontinueasagoingconcernintheyearahead.

4. Internal audit

TheprimaryobjectiveoftheInternalAuditdepartmentistodeterminewhethertheorganisation’snetworkofriskmanagement,controlandgovernanceprocesses,asdesignedandrepresentedbymanagement,areadequateandfunctioninginamannertoensurethat:

Risksareappropriatelyidentifiedandmanaged;Goodcorporategovernanceisachieved;Significantfinancial,managerialandoperatinginformationisaccurate,reliableandtimely;Employees’actionsareincompliancewithpolicies,standards,proceduresandapplicablelawsandregulations;Resourcesareacquiredeconomically,usedefficientlyandadequatelyprotected;Programmes,plansandobjectivesareachieved;andQualityandcontinuousimprovementarefosteredinPetroSA’scontrolprocess.

Nothinghascometotheattentionofthedirectors,nortotheattentionofmanagementortheinternal

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auditors,toindicatethatanymaterialbreakdowninthefunctioningoftheabove‑mentionedinternalcontrolsandsystemshasoccurredduringtheyearunderreview.

5. Enterprise Risk management

InPetroSA,enterpriseriskmanagementreferstotheproactivemanagementofthreatswhilstexhaustingtherelatedopportunitiesthatarepresentedbytakingbalanceddecisions.ThePresidentandCEOthroughtheRiskManagementandCompliancedepartmentisaccountableforassuringtheboardthattheriskmanagementprocessisinplaceandintegratedintoeverydaybusinessactivitiesofPetroSA.Thekeyobjectivesoftheriskmanagementandcompliancedepartmentare:

AssistingtheboardinsettingpolicyandstrategyforriskmanagementandcomplianceinPetroSA;Facilitatingtheappointmentofprimarychampionsofriskmanagementandcomplianceatbothstrategicandoperationallevels;Buildingariskawarenessculturewithintheorganisation,includingappropriateeducation.Establishinginternalriskpolicy,complianceandfraudpoliciesaswellasfacilitatingthecreationofstructuresfortheeffectiveroleoftheenterprise‑wideriskmanagementfunction.Designingandreviewingprocessesforriskmanagement;Coordinatingthevariousfunctionalactivities,whichadvisemanagementandstaffonriskmanagementandcomplianceissueswithintheorganisation;andAssistingtheorganisationindevelopingriskresponseprocessesfortransversalrisks,includingcontingencyandbusinesscontinuityprogrammes.

Throughtheriskmanagementandcompliancedepartment,thecompanyendeavourstominimiseriskbyensuringthatriskmanagementandthecultureofcomplianceisintegratedintomanagementprocessesthroughouttheorganisation.

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AnintegratedcommunicationstrategyhasbeendevelopedforallemployeesatalllevelstoensurethatriskawarenessisincorporatedintothePetroSAworkingcultureandlanguage.MajorrisksthatcouldinfluencetheachievementofPetroSA’sstrategicobjectivesareidentified,assessedandprioritisedregularlythroughariskassessmentandaccountabilityframeworkandcontrolmechanismsareimplemented

tomanageandmonitortheserisks.

6. Management reporting

Therearecomprehensivemanagementreportingdisciplinesinplace,whichincludethepreparationofannualbudgetsbyalldivisionsandreportingthereononaquarterlybasis.ThebudgetandcapitalexpenditurearereviewedandapprovedbytheBoard.Quarterlyperformanceresultsandthefinancialstatusofthecompanyandgrouparereportedagainstapprovedtargets.Profitprojectionsandforecastedcashflowsareupdatedmonthly,whileworkingcapitalandborrowinglevelsaremonitoredonanongoingbasis.Executivemanagementmeetsonaregularbasistoconsiderday‑to‑dayissuespertainingtothebusinessofthegroup.Moreformalbi‑weeklymeetingsaddressissuessuchasreport‑backfromthevariousdivisionsonresultsachieved,andissuesoropportunitiesthatcouldimpactonthegroup,itstradingactivitiesandshort‑termplanning.

7. Code of Ethics

Directorsandemployeesarerequiredtomaintainthehighestethicalstandards,ensuringthatbusinesspracticesareconductedinamannerthat,inall

reasonablecircumstances,isbeyondreproach.TheCodeofEthicsalsoarticulatesconductwithrespecttoconflictsofinterest,confidentialityandfairdealingamongothers.PetroSAhascontractedtheservicesofanindependenthotlineserviceprovidingfortheconfidentialreportingoffraudandotherinappropriatebehaviour.Employeebreachesaredealtwithinaccordancewiththedisciplinarypolicy.InadditiondirectorsarerequiredtoannuallydeclaretheirinterestsincontractsaswellasDirectorshipsinothercompaniesinaccordancewiththeCompaniesAct.

8. Social responsiblility

8.1. employment equity (ee) and black economic empowerment (Bee) ThePetroSAgrouphasbeenengagedinEEanddevelopmentprocessesforthepastsixyearsasamergedentity,andpriortothisforanumberofyearsasindividualcompanies.Thisprocessisdesignedtoincreasethenumberofemployeesfromdesignatedgroupsandfurtherempowerandtrainsuchemployeesatalllevels.AnEEpolicyhasbeenapprovedbytheBoard.Tothatend,the60:40designatedtonon‑designatedemployeeratioguidelineassetbytheBoardisbeingfollowed.

8.2. worker participationThegrouphasparticipativestructuresatvariouslevelsforhandlingissuesthathaveadirectimpactonemployees.Thesestructures,whichhavebeensetupinconsultationwiththetworecognisedunions,aredesignedtoachievegoodemployer‑employeerelations.Theyarealsoaimedatupholdingcompanyvaluesthroughtheeffectivesharingofrelevantinformation,consultation,identificationandresolutionofconflict.

statement of

Corporate Governancefor the year ended 31 March 2008


Theboardauditcommitteehasadoptedappropriateformaltermsofreferenceasitsauditcommitteecharterandhasdischargedallofitsresponsibilitiesassetoutinthecharter.

Inperformingitsdutiestheboardauditcommitteehasreviewedthefollowing:

Theeffectivenessoftheinternalcontrolsystems;Theeffectivenessoftheinternalauditdepartment;Theriskareasoftheentity’soperationscoveredinthescopesoftheinternalandexternalaudits;Theadequacy,reliabilityandaccuracyoffinancialinformationprovidedbymanagementandotherusersofsuchinformation;Theaccountingandauditingconcernsidentifiedasaresultoftheinternalandexternalaudits;Theentity’scompliancewithapplicablelegalandregulatoryprovisions;Theactivitiesoftheinternalauditfunction,includingitsannualworkprogramme,coordinationwiththeexternalauditors,thereportofsignificantinvestigationsandtheresponsesofmanagementtospecificrecommendations;andTheindependenceandobjectivityoftheexternalauditors.

Theauditcommitteeisoftheopinion,basedontheinformationandexplanationsgivenbymanagementandtheinternalauditdepartment,thattheinternalaccountingcontrolsareadequatetoensurethatthefinancialrecordsmayberelieduponforpreparingthefinancialstatements,andaccountabilityforassetsandliabilitiesismaintained.Nothinghascometotheattentionoftheauditcommitteetoindicatethatanymaterialbreakdowninthefunctioning

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ofthesecontrols,proceduresandsystemshasoccurredduringtheperiodunderreview.

HavingreviewedandevaluatedthefinancialstatementsofPetroSAandthegroupfortheyearended31March2008,themembersoftheboardauditcommitteebelievethatthefinancialstatementsfairlypresentthestateofaffairsofthecompany,itsbusiness,financialresults,performanceagainstpredeterminedobjectivesandfinancialpositionattheendofthefinancialyearandconcludethattheycomply,inallmaterialrespects,withtherequirementsoftheCompaniesAct(Act61of1973,asamended),thePublicFinanceManagementAct(Act1of1999,asamended)andSouthAfricanStatementsofGAAP.

Theboardauditcommitteeconcursthattheadoptionofthegoingconcernpremiseisappropriateinpreparingtheannualfinancialstatements.

Theboardauditcommitteehasrecommendedtheadoptionofthefinancialstatementsbytheboardofdirectorsattheirmeetingon17July2008.

MsCWNMolopeChairperson17July2008

Boardauditcommitteemembers:Prof.BFigajiMrMKajee

Report of the Board Audit Committee in terms of regulations 27(1) (10) (b) and (c) of the Public Finance Management Act, 1 of 1999, as amended.

RePoRt of tHe

Board Audit Committeefor the year ended 31 March 2008


ThecriteriaforassessingthematerialityandsignificantframeworkforThePetroleumOilAndGasCorporationofSouthAfrica(Pty)Ltdarecontainedinthetablebelow:

QuALITATIVe QuANTITATIVe

1.MATerIAL DISCLoSure of INforMATIoN To THe MINISTer

DisclosurebythePetroSABoardofmaterialfactstotheMinisterofMineralsandEnergy.

Factsthatmayinfluencethedecisionsoractionsofthestakeholdersofapublicentity.

Riskstothepublicentitythatmayimpactonthefuturesustainabilityoftheentityorthegroup.

2.ANNuAL rePorT, fINANCIAL STATeMeNT AND eXeCuTIVe AuTHorITY DISCLoSureS

Materiallosses Criminal conductExpenditurethatresultsfromanillegalact,fraudulentactand/oracriminalbehaviour.Allinstanceswillbefullydisclosedtotheboardauditcommittee.Disclosuresintheannualreportandthefinancialstatementswillbemadeforalllossesduetocriminalconduct.Irregular expenditureOtherthanunauthorisedexpenditure,incurredincontraventionoforthatisnotinaccordancewiththerequirementsofanyapplicablelegislation.fruitless and wasteful expenditureMadeinvainandwouldhavebeenavoidedhadreasonablecarebeenexercised.

AllexpenditureAllexpenditureAllexpenditure

3.BorrowINGS, GuArANTee, INDeMNITY or SeCurITY

Borrowings,guarantees,indemnityorsecuritymustbeapprovedbytheBoard.

4. APProVAL froM THe eXeCuTIVe AuTHorITY oN PArTICIPATIoN IN CerTAIN TrANSACTIoNS

Significantpartnership ApprovalfromtheexecutiveauthorityisneededwhencapitalatriskforPetroSAexceeds2%oftotalassets.

>R360000000

PetroSAdevelopmenttrust Approvalfromtheexecutiveauthorityisneededwhenfundingofthetrustexceeds2%oftotalassetsofPetroSA.

>R360000000

Significantunincorporatedjointventure

Approvalfromtheexecutiveauthorityisneededwhenven‑turecapitalatriskforPetroSAexceeds2%oftotalassets.

>R360000000

Significantshareholding ApprovalfromtheexecutiveauthorityisneededwhenacquisitionanddisposalofshareholdinginatradingcompanywherePetroSA’sinvestmentexceeds2%oftotalassets.

>R360000000

Significantassets Approvalfromtheexecutiveauthorityisneededwhenacquisitionanddisposalofanyimmovablepropertysuchasland,buildingsandmovableassetswhenthecostexceeds2%ofthetotalassetsofPetroSA.

>R360000000

Significantbusiness Approvalfromtheexecutiveauthorityisneededwhencom‑mencementandcessationofabusinessactivityrepresentsorwillrepresentmorethan2%ofPetroSA’stotalassets.

>R360000000

Significantchange Approvalfromtheexecutiveauthorityisneededwhenengaginginnewbusinessthatisunrelatedtothebusinessandwheretheinvestmentexceeds2%oftotalassets.

>R360000000

frameworkfor the year ended 31 March 2008

mateRiality and significant


AsummaryofThePetroleumOilAndGasCorporationofSouthAfrica(Pty)Ltdgroup’sbusinessperformanceagainstobjectivesiscontainedinthetablebelow.

Notesareappendedforclarificationoftheperformanceresults.

objective Key performance indicator

Target Actual Performance result

1 People 1.1 employment equity People Development 1.2Employeestrained1.3%returnfromCHIETATalent Attraction 1.4Turnaroundtimeretention Strategy 1.5Turnoverinspecialistcategories

74%74%75%100%placementwithin3monthsforallcandidates<2%ofexodusofscarceandcriticalskills

79%80%98%54%6.6%

AchievedAchievedAchievedNotAchieved(seenotesbelow)NotAchieved

2 finance Volumes 2.1GTLRefineryoutput2.2Non‑feedstockproduction(includingAbana)Bee2.3Procurementspend2.4BEEsalesProfitability Analysis 2.5Costtoincomeratio:Operations

AsperbudgetAsperbudget40%ofprocurementspend

15%oftotalproduction40%

85%ofbudget100%ofbudget70%17%oftotalproduction35%

NotAchievedAchievedAchievedAchievedNotAchieved

PeRfoRmance against

objectivesfor the year ended 31 March 2008



Objective Keyperformanceindicators Target Actual Performanceresults

3 Internal Business Process

SHeQ3.1Disablinginjuries(DIFR)3.2EnvironmentalspillagesDiversifying from Mou 3.3Implementationofdownstreamstrategy

3.4SaleofChemicalsintoRSA

3.5ULDexports

3.6IntroductionofvariousgradesofcondensatePlant Performance 3.7OverallutilisationGTL and CoD Commercialisation 3.8LTFTtechnologydevelopment

3.9CODcommercialisationstudiesfeedstock and non‑feedstock 3.10Long‑termfeedstocksolutionforGTLRefinery3.11ReplacementratioInfrastructure Initiatives 3.12Liquidfuelsinfrastructureprojects3.13Completedraftpre‑feasibilitystudiesonCTL

3.14Completedraftpre‑feasibilitystudiesoncruderefinery

3.15LNGimportterminalatCoega

<0.4030October2007

asperbudget

MarginaboveBFP

1newgradeby31March2008

72%TechnologyOptimisationPhaseIIMilestone1:31October2007

TechnologyCommercialisationPhaseI:31March2008Developmentandapprovaloffeedstocksolution31March20081yearSubmissiontoExco31March2008Technicalsolutiontobecompletedby31March2008

Technicalsolutiontobecompletedby31March2008

SubmissiontoExco31March2008

0.38030September2007

65%ofbudget

Marginachieved

None

73%30November2007Nosolutionby31March200831March20080.2531March200831March2008

31January2008

31March2008

AchievedAchievedAchieved

NotAchieved

Achieved

NotAchieved

AchievedNotAchievedNotAchievedAchievedNotAchievedAchievedAchieved

Achieved

Achieved

PeRfoRmance against

objectives



Notes1. People employment equity1.1 ee Plan ThetargetforthenumberofBlackemployeesatPetroSAfor2007/8is74%aspertheEEPlan.Thedesignatedemployeesasat31March2008forpermanentstaffis76%andfortotalemployees(permanentandFTC)is79%.

People Development 1.2Thetargetofemployeestrained,accordingtothesubmissiontoCHIETA,was74%perannumofthetotalnumberofemployees.Eightypercentofemployeesweretrainedthisyear.

1.3ThetargetpercentagereturnfromCHIETAwas75%.Dependingonaccreditedcourses,CHIETAwillrefundPetroSAonanannualbasis.Theamountpaidbackthisyearwas98%.

Talent Attraction 1.4Ofthe193candidatesemployedatPetroSA,104wereplacedwithinathree‑monthperiod.

retention Strategy 1.5Duetothehighturnoverintheindustryaswellasthehighdemandforspecialisedskills,aturnoverrateof6,6%wasobtainedforspecialisedcategories.Thefollowingjobcategoriesaretargeted:

•ReservoirEngineering; •ControlSystemsDesign/Engineering;•ProcessEngineering; •Geophysics/Geology; •ProjectEngineering.

2. Finance Volumes 2.1 GTL refinery ProductionThe14.9%decreaseinoutputagainstbudgetwasduetothefollowing: •IndustrialAction

•GasAvailability •EMlineplugging •DelayedSCGcommissioningandFAreliability•OutagesandreliabilityatGTLRefinery

2.2 Non‑feedstock production Sable: BetterthanexpectedperformanceofE‑BD3afterrestartinFebruary2008,whichmadeupforthe6‑monthshutdownduetothegasliftleak.ThebetterproductionperformancewasachieveddespitecuttingbackproductionfromDecember2006toadheretoanewminimumflaringstrategy.

oribi/oryx: Wellperformancewasgenerallybetterthanexpected,partiallyduetogoodpressuremaintenance.Loweringofseparatorpressureshadasmallpositiveeffectonproduction.TheE‑AR02Pacidcleanimprovedproductionfrommid‑April2007. Bee 2.3 Bee Procurement Fortheperiodunderreview,paymentsmadetoBEEsuppliersofgoodsandservicesequalled23.9%ofthetotalprocurement.However,intermsofthenewBEEcodesofgoodpractice,thetotalpreferentialprocurementfortheyearwas70%. 2.4 Bee sales BEEfuelsaleswere17%oftotalproduction.

Profitability Analysis

2.5 Cost to Income ratio Thecosttoincomeratioof35%wasachieved,whichwasbelowthebudgetof40%.Thiswasduetohighercostsattributabletotheimporteddieselthatwasnotbudgetedfor.Theimporteddieselresaleshaveimpairedoverallmargins.



3. Internal Business Processes

SHeQ3.1 DIfr (Disabling Injury frequency rate)TheDIFRiscalculatedonthebasisofarolling12‑monthformula,asshownbelow,fromJuly2007toJune2008.

DIFR=Numberofinjuriesx200000(hours)No.ofhoursworked(Duringperiodunderreview)

PetroSAachievedanexcellentrate0.38ascomparedtoaninternationalindustrystandardof1.0.DespiteachievingtheDIFRtarget,therewasatotalof15(non‑permanent)disablinginjuriesduringthefinancialyear.Thesehavebeeninvestigatedandmeasuresarebeingtakentocontainsuchincidents.Thereis,forexample,aspecialisedfocusoncontractorsafetymanagement.PetroSAnowdemandssafetymanagementplansfromcontractedcompaniesforapproval,andtheirlettersofgoodstandingfromtheCOIDCommissionerarecheckedforcompliance.

Further,withrespecttotheimplementationoftheISOsystems,100%ofallunits,withintheOperationsdivsion,wereontheISO9001:2000certificateby31March2008.

3.2 environmental spillagesNosignificantenvironmentalincidentshaveoccurredduringthefinancialyear.However,therewere6incidentswhichhadariskratingof1(Impact:slighteffect)thatoccurredattheGTLRefineryandtheFAPlatform.Necessaryactionsweretakentodealwiththeseincidentswithoutanyinvolvementfrommunicipalorotheremergencyservices.Diversifying from Mou3.3 Downstream strategy Thedownstreamstrategywasmulti‑prongedinapproachinthatnewsupplyagreementswithoilcompaniesweretobe

pursuedwhilstconcurrentlydevelopingamarketentrystrategy.Newagreementswiththeindustryhavebeenconcludedwhilstthedownstreammarketentrystrategyisbeingdeveloped.3.4 Chemical sales to rSA Localpetrochemicalsalesfortheyeartotalled65%ofthetarget,ofwhich55%werealcoholsand45%distillates.TofacilitatepetrochemicalsalesintothelocalmarketthecommissioningofpermanentroadloadingfacilitiesforalcoholsattheMosselBayrefinerytookplaceinNovember2007.Storagetankswithatotalcapacityof1,600mtweresecuredinDurbanfromwhichsalesofpetrochemicaldistillatestakeplace.3.5 uLD exportsTheaveragemarginforULDexportswasabovetheBFP.

3.6 Introduction of various grades of condensateTheplanstoincreasethecondensatebasketarecontinuing.NewgradespresentlybeingevaluatedareSnohvitandOrmenLange.Nofinalisationofresultsavailableasyet.Plant Performance 3.7 utilisation of fA to GasloopOverallutilisationisdefinedasthemeasurementtakingalllossesintoaccount,includingtimelostduetonon‑operationaswellaslossesduetoproductionatlowerproductionratesduetoslowdownetc.Inthisinstance,itwasdecidedtomeasurethisatasinglepoint,whichreflectedthetotalutilisation.Theoverallutilisationrateof73%wascalculatedasfollows:

OverallUtilisation=ActualruntimeXActualproductionrateCalendartimeXMaxprovencapacity

PeRfoRmance against

objectives



GTL and CoD Commercialisation 3.8 LTfT Technology Development

ThefinalisationofPhaseIIoftheLTFTtechnologydevelopmentrequiresthatthefollowingtwomilestonesarereached:

Firstmilestone:The2Gcatalystconceptualtestsuccessfullyachieved/completedbytheendofNovember2007.Secondmilestone:The2ndgenerationcatalystlong‑termstabilityverificationtobecommissionedinAugust2008andcompletedinFebruary2009.

3.9 CoD Commercialisation ThereisongoingdiscussionbetweenPetroSAandCEFregardingthemarketingoftheCODtechnology.

feedstock and non‑feedstock 3.10 Long‑term feedstock solution for the GTL refinery.MidstreamNewVenturescoordinatedGTLRefineryMasterplandevelopment,CNG,LNGandothergassupplyprojects.GasSummitfacilitatedprojectscreening/prioritisationandexecutionofplansthatresultedinthefocusbeingonoffshoreLNG,CNGandProjectJabulani.

3.11 replacement ratioThereplacementratioiscalculatedastheratiooftheTotalReservesAddedtotheCurrentProductionRate.Fromthisfinancialyeararatioof0.25wasobtained.

Infrastructure Initiatives 3.12 Liquid fuels Infrastructurewestern, Southern and eastern Cape: SubstantialandsignificantprogresswasachievedwithregardtotheLiquidFuelsInfrastructuredespitestrategicstock

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mandateuncertainties.Also,significantprogresswasmadeduringtheyearindefiningprojectrequirementsastowhetherornottoproceedwithprojects,specificallyforcrude.MarkedprogresswasmadetowardsunderstandingtherequirementsforinfrastructuredevelopmentssupportiveofthenewrefineryandanyDMEstrategicstockrequirements.Strongandrelevantrelationshipswereestablishedwithindustryplayersandstakeholders.Apre‑feasibilitystudyforMilnertonandaconceptstudyfornewCoegaterminalwascompleted.Apre‑feasibilitystudyforLPGterminalinWesternCapewasinitiated.

KwaZulu‑Natal and Gauteng: SubstantialprogresswasmadetowardsunderstandingrequirementsforinfrastructuredevelopmentssupportiveofthenewrefineryandanyDMEstrategicstockrequirements.

3.13 CTL refineryACTLrefinerypre‑feasibilitystudy,includingCTLconfiguration,capexestimate,siteselection,executionplanandproductmarketimpactassessment,hasbeencompleted.Significantprogresswasmadeduringtheyearindefiningtheprojectexecutionrequirements.Allaspectsofpre‑feasibility,asnotedinKPA,wereachieved,includingCTLconfiguration,capexestimate,siteselection,executionplanandproductmarketimpactassessment.Adraftbusinesscasehasbeencompleted.Sufficientunderstandingisnowavailabletomakedecisionsonwhethertheprojectisfeasible,whetherornottoproceedandhowtoaddress“show‑stoppers”.CTLProject:Searchandappraisalforcoalresources,includingdraftpartneragreementsandfarm‑inagreements,werecompleted.Keygovernmentapprovals(PFMAandMPRDA)havebeenreceivedfortheproject.ThelatereceiptoftheMPRDAprocurementprocesshasdelayedthestartoftheappraisalprogramme.Appraisalcommencedand9ofthe12appraisalholeswerecompletedattheendofMarch.Analysesareinprogressandfinalpartneragreementshavebeensigned.



3.14 Crude refineryAtechnicalpre‑feasibilitystudy,includingrefineryconfiguration,30%accuracycapexestimates,siteselectionandexecutionplan,havebeencompleted.

Commercialpre‑feasibilitystudy:Crudeselectionhasbeencompletedanddownstreaminvestigationisunderway.AdraftproductmarketstudywascompletedinMarch2008andacommercialbusinesscasewasdeveloped.Furtherrefinementwillbeinitiatedduringthefeasibilityphase.

3.15 LNG TerminalAtthebeginningofthe2007/8financialyearseveralmeetingswereheldwithEskomandi‑GasrepresentativestogettheircooperationontheCoegaLNGTerminal.Atthetimeitwas

envisagedthata2400MWcombined‑cyclegas‑turbine(CCGT)wouldbebuiltintheCoegaIndustrialDevelopmentZone.TomaketheCoegaLNGTerminaleconomicallyviable,whatwasrequiredwastheeconomiesofscaleforEskomandPetroSA(MosselBay)volumesgoingthroughtheterminal.EskomthenreportedthatwiththeregulatedelectricitytariffatthetimetheCCGTwasnoteconomicallyfeasibleandthatthePFMAprohibitedthemfrominvestinginaprojectthatdidnotmeettheireconomicbenchmarks.Asaninterimmeasure,itwasdecidedthatLNGbesuppliedutilisingspecialisedLNGtransportandre‑gasificationvesselsthatunloadgasatanewbuoyandpipelineconnectedtotheGTLplantatMosselBay.Theproject

wasapprovedbymanagement.

PeRfoRmance against

objectives


Group

2008 2007

r’000 r’000

Revenue

11,344,156

9,593,486

Paidtosuppliersformaterialandservices 7,834,402 5,411,369

3,509,754 4,182,117

Incomefrominvestments 1,192,002 869,192

wealth created 4,701,756 5,051,309

wealth distributed as follows:

Managementandemployees 805,460 744,684

Remunerationandbenefits 805,460 744,684

Providersofcapital 436,544 766,756

Dividendstoshareholders 425,000 690,000

Interestonborrowingsnetofforeignloanrevaluation 11,544 76,756

Government 894,081 326,434

Taxation 889,551 317,895

Otherpayments 4,530 8,539

Totaldistributions 2,136,085 1,837,874

Retainedforre‑investment 2,565,671 3,213,435

Depreciation 657,044 909,807

Incomeretainedinthebusiness 1,908,627 2,303,628

4,701,756 5,051,309

Thevalueaddedstatementmeasuresperformanceintermsofvalueaddedbythegroupthroughthecollectiveeffortsofmanagement,employeesandtheprovidersofcapital.Thestatementshowshowvalueaddedhasbeendistributedtothosecontributingtoitscreation.

Value Added Statementfor the year ended 31 March 2008


ThereportispresentedintermsofthePublicFinanceManagementAct1of1999(PFMA),asamended,andisfocusedonthefinancialresultsandfinancialpositionofthecompany.Informationpertainingtothecompany’sstateofaffairs,itsbusinessoperationsandperformanceagainstpredeterminedobjectivesisdisclosedelsewhereintheannualreport.Thedirectorsareresponsibleforthepreparation,integrityandfairpresentationoftheconsolidatedannualfinancialstatementsandsupplementaryinformationofThePetroleumOilandGasCorporationofSouthAfrica(Pty)Ltdanditssubsidiaries.Inorderforthedirectorstodischargetheseresponsibilities,aswellasthosebestowedonthemintermsofthePFMAandotherapplicablelegislation,theyhavedevelopedandmaintainasystemofinternalfinancialcontrols.Thefinancialstatements,presentedonpages102to158,havebeenpreparedinaccordancewiththeSouthAfricanStatementsofGenerallyAcceptedAccountingPracticeandtheCompaniesActofSouthAfrica,1973,andincludeamountsbasedonappropriateaccountingpolicies,supportedbyreasonableandprudentjudgmentsandestimatesmadebymanagement.Thedirectorsacknowledgetheirresponsibilitiesasstatedaboveandhaveestablishedinternalfinancialcontrolsandriskmanagementsystemsthatmaintainastrongcontrolenvironment.Thesesystemsaredesignedtoprovidereasonable,butnotabsolute,assuranceagainstmaterialmisstatementsandlosses.Basedoninformationandexplanationsreceivedfrommanagement,andtheinternalauditorsonthemaintenanceoftheinternalfinancialcontrols,thedirectorsareoftheopinionthatproperaccountingrecordshavebeenmaintainedandthatreliancecanbeplacedonthefinancialinformationusedforthisannualreport.Thegoingconcernbasishasbeenadoptedinpreparingthefinancialstatements.Thedirectorshavenoreasontobelievethatthegroupwillnotbeagoingconcerninthe

foreseeablefuture,basedonforecastsandavailablecashresources.Theviabilityofthegroupissupportedbythefinancialstatements.ThefinancialstatementshavebeenauditedbytheAuditorGeneralwhowasgivenunrestrictedaccesstoallfinancialrecordsandrelateddata,includingminutesofallmeetingsofshareholders,theboardofdirectors,committeesoftheboard,andmanagement.Thedirectorsbelievethatallrepresentationsmadetotheindependentauditorsduringtheirauditwerevalidandappropriate.TheAuditor‑General’sauditreportisattached.Intheopinionofthedirectorsbasedoninformationavailabletodate,theannualfinancialstatementsfairlypresentthefinancialpositionofPetroSAat31March2008,andtheresultsofitsoperationsandcashflowinformationfortheyearunderreview.Thegroupannualfinancialstatementsassetoutonpages102to158,fortheyearended31March2008,wereapprovedbytheboardofdirectorsintermsofSection51(1)(f)ofthePublicFinanceManagementActon21July2008andaresignedonitsbehalfby

Director

Director

Cape Town21 July 2008

statement of

responsibilityfor the year ended 31 March 2008


RePoRt of tHe

Auditor‑General

REPoRt oN thE FINaNCIal StatEMENtSIntroduction1. Ihaveauditedtheaccompanyinggroupannualfinancial

statementsofThePetroleumOilandGasCorporationofSouthAfrica(Pty)Ltd(PetroSA)whichcomprisetheconsolidatedandseparatebalancesheetasat31March2008,consolidatedandseparateincomestatement,consolidatedandseparatestatementofchangesinequityandtheconsolidatedandseparatecashflowstatementfortheyearthenendedandasummaryofsignificantaccountingpoliciesandotherexplanatorynotesandthedirectors’reportassetoutonpages102to156.

responsibility of the accounting authority for the financial statements

2. TheaccountingauthorityisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithSouthAfricanStatementsofGenerallyAcceptedAccountingPracticeandinthemannerrequiredbythePublicFinanceManagementAct,1999(ActNo.1of1999)(PFMA),theCompaniesActofSouthAfrica,1973(ActNo.61of1973)andtheCentralEnergyFundAct,1977(ActNo.38of1977)asamended.Thisresponsibilityincludes:• Designing,implementingandmaintaininginternal controlrelevanttothepreparationandfairpresentation offinancialstatementsthatarefreefrommaterial misstatement,whetherduetofraudorerror;• Selectingandapplyingappropriateaccounting policies;and• Makingaccountingestimatesthatarereasonable inthecircumstances.

responsibility of the Auditor‑General3. Asrequiredbysection188oftheConstitutionoftheRepublic

ofSouthAfrica,1996readwithsection4ofthePublicAuditAct,2004(ActNo.25of2004)(PAA),section300oftheCompaniesActofSouthAfrica,andsection1E(3)oftheCentralEnergyFundAct,1977(ActNo.38of1977)asamended,myresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonmyaudit.

4. IconductedmyauditinaccordancewiththeInternationalStandardsonAuditingandGeneralNotice616of2008,issuedinGovernmentGazetteNo.31057of15May2008.Those

standardsrequirethatIcomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceonwhetherthefinancialstatementsarefreefrommaterialmisstatement.

5. Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.

6. Anauditalsoincludesevaluatingthe:• Appropriatenessofaccountingpoliciesused;• Reasonablenessofaccountingestimatesmadeby management;and• Overallpresentationofthefinancialstatements.

7. IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisformyauditopinion.

opinion 8. Inmyopinionthegroupannualfinancialstatementspresent

fairly,inallmaterialrespects,thefinancialpositionofThePetroleumOilandGasCorporationofSouthAfrica(Pty)Ltdasat31March2008,inaccordancewithSouthAfricanStatementsofGenerallyAcceptedAccountingPracticeandinthemannerrequiredbythePFMAandtheCompaniesActofSouthAfrica.

othER MattERSWithoutqualifyingmyauditopinion,Idrawattentiontothefollowingmattersthatrelatetomyresponsibilitiesintheauditofthefinancialstatements:

Matters of governance9. ThePFMAtaskstheaccountingauthoritywithanumberof

responsibilitiesconcerningfinancialandriskmanagementandinternalcontrol.Fundamentaltoachievingthisistheimplementationofcertainkeygovernanceresponsibilities,whichIhaveassessedasfollows:

to Parliarment on the Group Financial Statements and Performance Information of the Petroleum Oil and Gas Company of South Africa

(Proprietary) Limited for the year ended 31 March 2008



unaudited supplementary schedules

10. Thesupplementaryinformationsetoutonpages157to158doesnotformpartofthefinancialstatementsandispresentedasadditionalinformation.IhavenotauditedthisscheduleandaccordinglyIdonotexpressanopinionthereon.

othER REPoRtING RESPoNSIBIlItIES REPoRt oN PERFoRMaNCE INFoRMatIoN

11. Ihavereviewedtheperformanceinformationassetoutonpages91to97.

responsibility of the accounting authority for the performance information

12. Theaccountingauthorityhasadditionalresponsibilitiesasrequiredbysection55(2)(a)ofthePFMAtoensurethattheannualreportandauditedfinancialstatementsfairlypresenttheperformanceagainstpredeterminedobjectivesofthepublicentity.

responsibility of the Auditor‑General13. Iconductedmyengagementinaccordancewithsection13

ofthePAAreadwithGeneralNotice616of2008,issuedinGovernmentGazetteNo.31057of15May2008.

14. Intermsoftheforegoingmyengagementincludedperformingproceduresofanauditnaturetoobtainsufficientappropriateevidenceabouttheperformanceinformationandrelatedsystems,processesandprocedures.Theproceduresselecteddependontheauditor’sjudgement.

15. IbelievethattheevidenceIhaveobtainedissufficientandappropriatetoreportthatnosignificantfindingshavebeenidentifiedasaresultofmyreview.

aPPRECIatIoN

16. TheassistancerenderedbythestaffofThePetroleumOilandGasCorporationofSouthAfrica(Pty)Ltdduringtheauditissincerelyappreciated.

Pretoria

31July2008

Matterofgovernance Yes No

Auditcommittee• The entity had an audit committee in operation throughout the financial

year.X

• The audit committee operates in accordance with approved, written terms of reference.

X

• The audit committee substantially fulfilled its responsibilities for the year, as set out in section 77 of the PFMA and Treasury Regulation 27.1.8.

X

Internalaudit• The entity had an internal audit function in operation throughout the finan-

cial year.X

• The internal audit function operates in terms of an approved internal audit plan.

X

• The internal audit function substantially fulfilled its responsibilities for the year, as set out in Treasury Regulation 27.2.

X

OthermattersofgovernanceThe group annual financial statements were submitted for audit as per the legislated deadlines (section 55 of the PFMA for public entities).

X

The group annual financial statements submitted for audit were not subject to any material amendments resulting from the audit.

X

No significant difficulties were experienced during the audit concerning delays or the unavailability of expected information and/or the unavailability of senior management.

X

The prior year’s external audit recommendations have been substantially implemented.

X

RePoRt of tHe

Auditor‑General


InmycapacityasCompanySecretary,Iherebyconfirm,intermsofsection268G(d)oftheCompaniesAct,1973,thatfortheyearended31March2008thecompanyhaslodgedwiththeRegistrarofCompaniesallsuchreturnsasarerequiredofacompanyintermsofthisAct,andthatallsuchreturnsare,tothebestofmyknowledgeandbelief,true,correctanduptodate.

Name: AdvPSVNgaba

Date: 21July2008

comPany secRetaRy’s

Certificatefor the year ended 31 March 2008


1. Introduction

Thedirectorspresenttheirannualreportthatformspartoftheauditedannualfinancialstatementsofthegroupfortheyearended 31 March 2008.

2. Directors

2.1. The directors of the company during the year were as follows:

DrPSMolefe Non‑executive‑ChairmanMrMKajee Non‑executive,appointed01July2007MrRJAngel Non‑executive,appointed01July2007,resigned07December2007MrSMkhize Executive‑PresidentandCEOMrMWMkhize Non‑executive,appointed26July2007MrANkuhlu Non‑executiveMsCWNMolope Non‑executiveMrNGNika ExecutiveProf.BFigaji Non‑executiveMrMBDamane Non‑executiveMsNYVukuza‑Linda Non‑executive,appointed01July2007MsBBSiwisa Non‑executive,appointed26July2007MrNHGumede Non‑executive,resigned30June2007MsRJHuntley Non‑executive,resigned30June2007MsTChikane Non‑executive,resigned30June2007MrDRZihlangu Non‑executive

Attendanceatmeetings

23/05/2007 20/07/2007 06/08/2007 21/09/2007 15/11/2007 15/02/2008 30/03/2008

MrRJAngel ‑ ‑ Y Y Y R

MrDRZihlangu Y Y Y Y Y Y Y

DrPSMolefe Y N N Y Y Y N

MrMBDamane Y Y Y Y Y Y Y

Prof.BFigaji N Y Y N Y N N

MrSMkhize Y Y Y Y Y Y Y

MrNGNika Y Y Y Y Y Y Y

MrANkuhlu Y N Y Y N Y Y

MsCWNMolope ‑ Y N Y Y Y N

MsNYVukuza‑Linda ‑ Y Y Y Y Y Y

MrMWMkhize ‑ ‑ Y N Y Y N

MrMKajee ‑ Y N Y Y Y Y

MrNHGumede N R

MsBBSiwisa ‑ ‑ Y Y Y Y Y

MsRJHuntley Y R

MsTChikane N R

Y =Attendedmeeting N=Apologyreceived ‑=Notyetappointed R=ResignedfromBoard

for the year ended 31 March 2008DirectorsRePoRt of tHe



2.2. Board audit committee

Thiscommitteeoftheboardofdirectorscomprisedthefollowingmembers:MrMKajee ‑Non‑executive(Appointed21September2007)MsRJHuntley ‑Non‑executive(Resigned30June2007)MsCWNMolope‑Non‑executive(Chairman)(Appointed21September2007)ProfBFigaji ‑Non‑executiveMsTCPChikane ‑Non‑executive(Chairman)(Resigned30June2007)Attendanceatmeetings

14/05/2007 11/07/2007 12/09/2007 28/01/2008MsCWNMolope N Y Y YProf.BFigaji N Y Y YMrMKajee ‑ ‑ Y YMsTChikane Y RMsRJHuntley Y R


2.3. Board human capital committee

Thiscommitteeoftheboardofdirectorscomprisedthefollowingmembers:MrDRZihlangu ‑Non‑executive(Chairman)MrANkuhlu ‑Non‑executiveDrPSMolefe ‑Non‑executiveMsNVukuza‑Linda ‑Non‑executive(Appointed01July2007)MsTChikane‑Non‑executive(Resigned30June2007)


10/05/2007 09/07/2007 20/09/2007 25/01/2008 14/02/2008 21/02/2008

MrDRZihlangu Y Y Y Y Y YDrPSMolefe Y Y Y N Y NMrANkuhlu Y Y Y Y Y NMsNYVukuza‑Linda ‑ ‑ Y Y Y YMsTChikane Y R



2.4. Board business performance & strategy committee

Thiscommitteeoftheboardofdirectorscomprisedthefollowingmembers:MrANkuhlu ‑Non‑executive(Chairman)Prof.BFigaji ‑Non‑executiveMrNHGumede ‑Non‑executive(Resigned30June2007)MrMBDamane ‑Non‑executiveMrRJAngel ‑Non‑executive(Appointed21September2007,Resigned07December2007)MrMWMkhize‑Non‑executive(Appointed08February2008)Attendanceatmeetings

08/05/2007 04/07/2007 20/09/2007 22/10/2007 08/02/2008

MrANkuhlu Y Y Y Y YProf.BFigaji Y Y Y N YMrRJAngel ‑ ‑ ‑ Y RMrNHGumede N Y R

MrMBDamane N N Y N YMrMWMkhize ‑ ‑ ‑ ‑ Y


2.5. Board risk management and compliance committee

Thiscommitteeoftheboardofdirectorscomprisedthefollowingmembers:MsRJHuntley ‑Non‑executive(Chairmanresigned30June2007)MrDRZihlangu ‑Non‑executiveProfBFigaji ‑Non‑executiveMsTChikane ‑Non‑executive(Resigned30June2007) MsBBSiwisa ‑Non‑executive(Appointed21September2007)MrMKajee ‑Non‑executive(Chairmanappointed21September2007)


14/05/2007 11/07/2007 21/09/2007 06/02/2008

MrMKajee ‑ ‑ Y YProf.BFigaji N Y Y Y

MrDRZihlangu Y Y Y Y

MsRJHuntley Y R

MsTChikane Y R

MsBBSiwisa ‑ ‑ ‑ Y





3. Secretary

TheCompanySecretaryisAdvPSVNgabaandherbusinessandpostaladdressesareasfollows:

151FransConradieDriveParow7500

PrivateBagX5Parow7499

4. Nature of business

Activities Themainareasofactivitywithinthegroupduringtheyearareasfollows:

Theexplorationandproductionofcrudeoilandnaturalgasoffthesouth‑easterncoastofSouthAfricaandinNigeriaandparticipationintheacquisitionofinternationalupstreampetroleumventures;TheproductionandmarketingofsyntheticfuelsproducedfromoffshoregasandcondensateattheGTLplantatMosselBaytothelocalmarket,andhigh‑valuechemicalsinternationally;andThemanagementofstrategiccrudeoilstockandstoragefacilitiesonbehalfofthegovernment.

objectivesThekeyelements/objectivesofPetroSA’scorebusinessstrategyareasfollows:

1. exploration for feedstock and non‑feedstock1.1 PrimaryfocusongasprojectsinSouthernAfrica.1.2 Selectivelydevelopopportunitiestoaccessgas

orcrudeinotherpartsoftheworld.1.3 ImplementSouthCoastGasprojectby30

October2008.

2. Commercialisation of GTL and CoD 2.1 DevelopprojectstoenhanceGTLandCOD

commercialisationefforts.

3. Diversifying from the Mou3.1 Entertheretailandcommercialmarkets.

•

•

•

4. Developing related infrastructure4.1 Developmentofrefiningfacility.4.2 Building/Upgradingofrelatedinfrastructure.4.3 SecurefeedstockfortheMosselBayplant

beyond2010(currentreservesestimate).

5. Review of financial position

Group financial results and operating activitiesAnalysis and review of results and financial position ThegroupachievedanetprofitofR1,83billion(2007:R2,71billion)fortheyearunderreview.SalesrevenuewasparticularlyhighatR11billion(2007:R8,95billion)andisattributedtothehighoilpricesthataveragedUSD82.29perbarrelversusthepreviousyear’sUSD64.15.ThegrouprevenuereflectstheconsolidationofBrassExplorationUnlimited,theNigeriansubsidiary,fortheperiodJanuary2007toDecember2007(BEU’sfinancialyear‑end).Salesvolumeswere14%lowerthanlastyeardespitebeingboostedbythedieselimports,whichmadeup21%oftotalvolumes.ProductionvolumesdeclinedsignificantlythisyearduetotheOrcarecertification(Oribi/Oryxcrude)andweakgas‑flowratesfromboththeSableandFA‑EMfields.Overallgroupoperatingcosts(R9,5billion)increasedby34%onthepreviousyear(2007:R7,1billion).Thiswasmainlyduetotheincreasedcostoffeedstockpurchasesasaresultofthehighoilpricesandtheweakerrand.Thegrouprecordedapre‑taxprofitofR2,72billion,whichreflectsadecreaseof10%ontheprioryearprofitofR3,03billion.AtaxchargeforBEUinNigeria,aswellasexplorationactivitiesinsubsidiarycompaniesinSudan,EgyptandEquatorialGuineaandthechangeinthetaxationlegislation,whichplacesPetroSAinataxablepositionforthefirstyear,resultedinadecreaseingroupprofitaftertaxtoR1,83billionfromR2,71billionin2007.Thegroupbalancesheetremainsstrong,withtotalassetsofR23,8billion(2007:R19,1billion).Theincreaseismainlyduetothecashgeneratedbythegroupduringtheyear.AcashbalanceofR12,9billion(2007:R11,0billion)versusalong‑termloanbookofR0,11billion(2007:R0,18billion)reflectsthegroup’sstrongnetcashposition.TheImvumemattercontinuestobepursuedwithinthecorridorsoftheWitwatersrandHighCourt.Interlocutoryactionshavebeenbroughtbybothpartieswiththeintendedresolutionofthesame.Itisexpectedtofinalisetherecovery


ofthecapitalamountofR8millionandR6,3millioninterestpayablebytheendofJuly2008.

6. Share capital

Detailsofthesharecapitalofthecompanyaresetoutinnote14totheannualfinancialstatements.Therehavebeennochangestothesharecapitalofanyoftheothergroupcompaniesduringtheyearunderreview.

7. Dividends

AdividendofR425millionwasdeclared,ofwhichR220millionwaspaidduringthefinancialyear(2007:R690million)andR205millionisstilltobepaidbutaccruedfor.

8. Materiality and significant framework

Amaterialityandsignificantframeworkhasbeendevelopedforreportinglossesthroughcriminalconductandirregular,fruitlessandwastefulexpenditure,aswellasforsignificanttransactionsenvisagedpersection54(2)ofthePFMAthatrequiresministerialapproval.TheframeworkwasfinalisedafterconsultationwiththeexternalauditorsandhasbeenformallyapprovedbytheBoard.DuringtheyearanamountofR189,000waspaidforthestandingtimeoftransportvehicles.AfurtherR202,505waspaidasaninterestchargeonlatepaymentofaninvoice,whichwasincurredduetoPetroSAwaitingforthetransferofstocktoitstankfacilities.AnamountofR4,463,756wasincurredandpaidwithrespecttopenaltiesandinterestforindirecttaxes.On5May2008PetroSAreceivedadefaultjudgementfortheamountofR952,579againstaformeremployeefortherecoveryofsettlementamountspaidtoWesbankforoutstandingvehicleloans.HoweverPetroSAisnotpursuingthisjudgementcurrentlyastheformeremployeeisinvolvedinanarbitrationmatterwithPetroSA.

9. holding company

TheholdingcompanyisCEF(Pty)Ltd(CEF)andtheultimateshareholderistheSouthAfricanGovernment.AllsharesheldbytheGovernmentinCEFarenottransferableintermsoftheCentralEnergyFundAct(ActNo.37of1977).

10. Subsidiaries and associates

ThePetroSAgroupstructureisexpandingatarapidrate,with

thegrowthmostlydrivenbythecompany’spursuitofexplorationandproductionopportunitiesinAfricaandelsewhereinlinewiththecompany’sobjectives.Thecompanieswithinthegrouparesubsidiarieswhoseexistenceisdrivenbybusinessneeds.TheBrassExplorationUnlimited(BEU)financialyearendis31DecemberinaccordancewithNigerianlegislation,whichisnotincompliancewiththePFMArequirements.ThegroupresultsincludetheperformanceofBEUfortheyearended31December2007.SalimaPetroleumOperatingCompanywasincorporatedinMauritiusduringthecurrentfinancialyear,withPetroSAholding80%ofitssharecapitalandtheSudanesenationalpetroleumcompanyholdingtheremaining20%.Thesharecapitalwillbeissuedinthe2009financialyear.PetroSAhasa37.5%interestintheassociatecompanyGTL.F1AG,aSwissincorporatedtechnologycompanythatholdsthelicencesoftheGTLtechnology.ThegroupresultsincludetheperformanceofGTL.F1AGfortheyearended31December2007.DuringthepreviousfinancialyearPetroSAacquireda30%interestinSudChemieZeolites(Pty)Ltd,aSouthAfricanincorporatedcompany.ThegroupresultsincludetheperformanceofSudChemiefortheyearended31December2007.ThisaccountingtreatmentispermittedbyInternationalAccountingStandard27paragraphs26and27.Thedetailsofthegroup’ssubsidiariesaresetoutinnote6andassociatesinnote8tothefinancialstatements.

11. Post‑balance sheet events

On16May2008SudChemieSA(Pty)LtdexerciseditscalloptionintermsoftheShareholderAgreementtobuybackthe30%investmentthatPetroSAholdsinSudChemieZeolites(Pty)Ltd.Thistransactionwillbeconcludedinthe2009financialyear.AdecisionwastakentodivestfromtheNigeriansubsidiaryBrassExplorationUnlimited.Theplanwillbeformalisedinthenextfinancialyear.

12. Going concern

Thedirectorsbelievethatthegroupwillcontinueasagoingconcernintheyearahead.



Group Company 2008 2007 2008 2007 Notes r’000 r’000 r’000 r’000

ASSeTS NoN‑CurreNT ASSeTS 6,018,550 5,312,818 6,294,361 5,362,390Property,plantandequipment 4 5,202,428 4,533,504 4,867,849 4,250,429Assetspendingdetermination 5 54,793 54,793 54,793 54,793Investmentsinsubsidiaries 6 ‑ ‑ 2,137 1,854Intangibleassets 7 79,256 79,236 94 74Investmentsinassociatecompanies 8 11,019 25,609 31,123 31,123Loansreceivable 9 133,406 82,028 800,717 486,469Amountsheldbyholdingcompany 10 537,648 537,648 537,648 537,648

CurreNT ASSeTS 17,106,490 13,788,003 15,821,416 12,817,017Inventories 11 1,870,213 972,345 1,847,577 933,382Tradeandotherreceivables 12 2,360,387 1,557,734 2,140,349 1,484,971Cashandcashequivalents 13 12,875,890 11,257,924 11,833,490 10,398,664ToTAL ASSeTS 23,125,040 19,100,821 22,115,777 18,179,407

eQuITY AND LIABILITIeSCAPITAL AND reSerVeS 14,920,594 13,497,146 15,073,396 13,512,463Sharecapital 14 2 2 2 2Sharepremium 14 2,755,934 2,755,934 2,755,934 2,755,934Non‑distributablereserve 17,640 (440) (7,718) (7,718)

Retainedearnings 12,147,018 10,741,650 12,325,178 10,764,245

NoN‑CurreNT LIABILITIeS 4,362,463 3,559,222 4,126,759 3,306,943

Long‑termloans:shareholder’sloans 15 105,149 175,089 105,149 175,089

Deferredtaxliability 16 423,289 139,958 307,060 ‑

Provisions 17 3,834,025 3,244,175 3,714,550 3,131,854

CurreNT LIABILITIeS 3,841,983 2,044,453 2,915,622 1,360,001

Incometax 1,080,450 537,537 357,250 ‑

Tradeandotherpayables 18 2,375,899 1,055,460 2,172,738 908,545

Short‑termportionoflong‑termloans 15 90,134 80,813 90,134 80,813

Bankoverdraft 13 ‑ 236,643 ‑ 236,643

Dividend 205,000 ‑ 205,000 ‑

Currentprovisions 17 90,500 134,000 90,500 134,000

ToTAL eQuITY AND LIABILITIeS 23,125,040 19,100,821 22,115,777 18,179,407

Balance Sheetsas at 31 March 2008




Revenue 21 11,018,772 8,951,756 10,283,291 8,094,870

Costofsales (7,990,774) (6,133,327) (7,597,908) (5,732,962)

Grossprofit 3,027,998 2,818,429 2,685,383 2,361,908

Otheroperatingincome 325,384 641,730 326,921 652,327

Operatingexpenses (1,554,060) (993,829) (1,354,432) (879,195)

Operatingprofit 22 1,799,322 2,466,330 1,657,872 2,135,040

Investment income 23 1,192,002 869,192 1,249,178 918,933Financecosts 24 (256,815) (297,805) (256,807) (292,470)

Lossfromassociates 25 (14,590) (5,515) ‑ ‑Profitbeforetaxation 2,719,919 3,032,202 2,650,243 2,761,503

Taxation 26 (889,551) (317,895) (664,310) ‑Profitfortheyear 1,830,368 2,714,307 1,985,933 2,761,503

Income Statements


Group Share capital

r’000

Share premium

r’000

Non‑distributable reserve

r’000

retained earnings

r’000

Total

r’000

Balance at 01 April 2006 2 2,755,934 (7,549) 8,745,663 11,494,050

Changeinaccountingpolicy/Priorperioderrors

(28,320)

(28,320)

restated balance 2 2,755,934 (7,549) 8,717,343 11,465,730

Profitfortheyear 2,729,087 2,729,087

Dividends (690,000) (690,000)

Priorperioderror(Refernote31) (14,780) (14,780)

Foreigncurrencytranslationreserve 7,109 7,109

Balance at 01 April 2007 2 2,755,934 (440) 10,741,650 13,497,146Profitfortheyear 1,830,368 1,830,368

Dividends (425,000) (425,000)

Foreigncurrencytranslationreserve 18,080 18,080

Balance at 31 March 2008 2 2,755,934 17,640 12,147,018 14,920,594

Company Share capital

r’000

Share premium

r’000

Non‑distributable reserve

r’000

retained earnings

r’000

Total

r’000

Balance at 01 April 2006 2 2,755,934 (7,718) 8,692,742 11,440,960


Dividends (690,000) (690,000)Priorperioderror(Refernote31) (24,008) (24,008)

Balance at 01 April 2007 2 2,755,934 (7,718) 10,764,245 13,512,463


Dividends (425,000) (425,000)

Balance at 31 March 2008 2 2,755,934 (7,718) 12,325,178 15,073,396

statement of

Changes in equityas at 31 March 2008



Cash flow from operating activities 3,202,281 3,198,649 3,152,950 2,880,754

Cashreceiptsfromcustomers 28.1 10,526,913 9,049,555 9,954,834 8,293,835

Cashpaidtosuppliersandemployees 28.2 (8,210,331) (6,051,013) (7,808,074) (5,616,947)

Cashgeneratedbyoperations 28.3 2,316,582 2,998,542 2,146,760 2,676,888

Interestreceived 1,191,132 868,322 1,248,308 918,063

Interestpaid (22,996) (25,188) (22,988) (25,067)

Dividendsreceived 870 870 870 870

Dividendspaid (220,000) (690,000) (220,000) (690,000)

Taxation(paid)/refunded 28.4 (63,307) 46,103 ‑ ‑

Cash flow from investing activities (1,343,498) (1,335,570) (1,477,307) (1,469,328)

expenditure to maintain operating capacity

Property,plantandequipmentacquired (1,306,782) (1,645,681) (1,162,848) (1,594,008)

Intangibleassetsacquired ‑ (7,164) ‑ ‑

Disposalsofproperty,plantandequipment 72 ‑ 72 ‑

Recoupmentofcashheldbyholdingcompany ‑ 339,070 ‑ 339,070

expenditure for expansion

Increaseininvestmentloans (51,378) (19,724) (51,378) (19,724)

Investments(acquired)/lossesrealised 14,590 (2,071) ‑ (7,585)

Loanstosubsidiaries ‑ ‑ (263,153) (187,081)

Cash flow from financing activities

Loansrepaid (58,488) (105,195) (58,488) (105,195)

Increaseincashandcashequivalents 1,800,295 1,757,884 1,617,155 1,306,231

Effectsofexchangeratechanges 54,314 192,918 54,314 192,918

Cashandcashequivalentsatbeginningoftheyear 11,021,281 9,070,479 10,162,021 8,662,872

Cashandcashequivalentsatendoftheyear 12,875,890 11,021,281 11,833,490 10,162,021

Cash flow Statementsfor the year ended 31 March 2008


1 Principal accounting policies Thefollowingaretheprincipalaccountingpoliciesofthe

groupwhichare,inallmaterialrespects,consistentwiththoseappliedinthepreviousyear,exceptasotherwiseindicated:

1.1 Basis of preparation Thefinancialstatementsarepreparedunderthehistorical

costbasis,exceptwhereotherwisespecified.ThegroupannualfinancialstatementsarepreparedinaccordancewithSouthAfricanStatementsofGenerallyAcceptedAccountingPracticeandtheCompaniesActofSouthAfrica.

1.2 Basis of consolidation Theconsolidatedfinancialstatementsincorporatethe

annualfinancialstatementsoftheentityandenterprisescontrolledbytheentityat31Marcheachyear.

Controlisachievedwheretheentityhasthepowertogovernthefinancialandoperatingpoliciesofaninvesteeenterprisesoastoobtainbenefitsfromitsactivities.

Onacquisition,theassetsandliabilitiesoftherelevantsubsidiariesaremeasuredattheirfairvaluesattheeffec‑tivedateofacquisition.

Theresultsofsubsidiariesacquiredordisposedofduringtheyearareincludedintheconsolidatedincomestate‑mentfromtheeffectivedateofacquisitionoruptotheeffectivedateofdisposal,asappropriate.

Wherenecessary,adjustmentsaremadetotheannualfinancialstatementsofsubsidiariestobringtheaccount‑ingpoliciesusedinlinewiththegroupaccountingpoli‑cies.

Allsignificantinter‑entitytransactions,unrealisedprofitandlossesandbalancesbetweengroupenterprisesareeliminatedonconsolidation.

Themostrecentauditedannualfinancialstatementsofassociates,jointventuresandsubsidiariesareusedwhereavailable,whichareallwithinthreemonthsoftheyear‑endofthegroup.Adjustmentsaremadetothefinan‑cialresultsformaterialtransactionsandeventsintheinterveningperiod.Lossesinexcessofthegroup’sinter‑estarenotrecognisedunlessthereisabindingobligationtocontributetothelosses.

1.2.1 Company financial statements Investmentsinsubsidiaries,associatesandjointventuresinthefinancialstatementspresentedbythecompanyarerecognisedatcost,exceptwherethereisapermanentdeclineinthevalue,inwhichcasetheyarewrittendowntofairvalue.1.2.2 Consolidated financial statements

Interest in subsidiaries Subsidiariesareentitiescontrolledbytheholdingcompany.Controlisachievedwherethecompanyhasthepowertogovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Theconsolidatedfinancialstatementsincorporatetheassets,liabilities,income,expensesandcashflowsofthecompanyandallentitiescontrolledbythecompanyasiftheyareasingleeconomicentity.

Interest in associates Anassociateisanenterpriseinwhichthegrouphassignificantinfluence,throughparticipationinthefinancialandoperatingpolicydecisionsoftheinvestee,butnotcontrol.Theresultsandassetsandliabilitiesofassociatesareincorporatedinthefinancialstatementsbyusingtheequitymethodofaccounting,fromtheeffectivedatesoftheiracquisitionuntiltheeffectivedatesoftheirdisposal.

Interest in joint ventures Ajointventureisacontractualagreementbetweentwoormorepartiestoundertakeaneconomicactivity,whichisunderjointcontrol.Investmentsinjointlycontrolledentitiesareaccountedforbywayoftheproportionateconsolidationmethodwherebythegroup’sproportionateshareofassets,liabilities,revenuesandexpensesofthejointventurearecombined,onalinebylinebasis,withsimilaritemsinthefinancialstatementsofthegroup.Theresultsofjointventuresareincludedfromtheeffectivedatesoftheiracquisitionuptotheeffectivedatesoftheirdisposal.Allsignificantinter‑companytransactionsandbalancesbetweengroupentitiesareeliminatedonproportionateconsolidationtotheextentofthegroup’sinterestinthejointventure.

1.3 Comparative figuresComparativefiguresarerestatedintheeventofachangeinaccountingpolicyorpriorperioderror.

notes to tHe annual

financial Statementsfor the year ended 31 March 2008



Financial Statement Items

1.4 Property, plant and equipment 1.4.1 Carrying amountsThecarryingamountsofproperty,plantandequipmentarereviewedforimpairmentwheneventsorchangesincircumstancesindicatethecarryingamountmaynotberecoverable.Ifanysuchindicationexistsandwherethecarryingvaluesexceedtheestimatedrecoverableamount,theassetsorcashgeneratingunitsarewrittendowntotheirrecoverableamount.Therecoverableamountofproperty,plantandequipmentisthegreaterofnetsellingpriceandvalueinuse.Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre‑taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Foranassetthatdoesnotgeneratelargelyindependentcashinflows,therecoverableamountisdeterminedforthecashgeneratingunittowhichtheassetbelongs.Impairmentlossesarerecognisedintheincomestatement.

Allproperty,plantandequipmentarestatedatcostlessaccumulateddepreciationandaccumulatedimpairmentlosses.

1.4.2 CostCostincludesallcostsdirectlyattributabletobringingtheassetstoworkingconditionfortheirintendeduse.Improvementsarecapitalised.Maintenance,repairsandrenewalswhichneithermateriallyaddtothevalueofassetsnorappreciablyprolongtheirusefullivesarechargedagainstincome.Financecostsdirectlyassociatedwiththeconstructionoracquisitionofmajorassetsarecapitalisedatinterestratesrelatingtoloansspecificallyraisedforthatpurpose,orattheaverageborrowingratewherethegeneralpoolofborrowingsisutilised.

1.4.3 DisposalsGainsorlossesondisposalofproperty,plantand

equipmentaredeterminedbyreferencetotheircarryingamount.Ondisposalofrevaluedassets,amountsintherevaluationreserverelatingtothatassetaretransferredtoretainedearnings.

1.4.4 DepreciationAllproperty,plantandequipmentaredepreciatedexceptfreeholdland,investmentpropertiesandmineralrights.

Depreciationiscalculatedonthestraightlinemethodtowriteoffthecostofeachasset,ortherevaluedamounts,totheirresidualvaluesovertheirestimatedusefullivesasfollows:Buildings 40years,Plantandequipment 3‑8years,Motorvehicles 5years,Furnitureandfittings 5‑6years,Explorationequipment 3‑8years,

Computerequipment 3years,withtheexceptionofProductionassetsandRestorationcostswheretheunitsofproductionmethodisusedtocalculatedepreciation.Referencetothesupplementaryreservedisclosurecanbemadeformoreinformationonthereservesused.Improvementstoleasedpremisesarewrittenoffovertheperiodofthelease.

Themethodsofdepreciation,usefullivesandresidualvaluesarereviewedannually.

1.4.5 Production assets (oil and gas fields)Subsequentexpenditurethatenhancesorextendstheperformanceofproperty,plantandequipmentbeyondtheiroriginalspecificationsisrecognisedascapitalexpenditureandaddedtotheoriginalcostoftheasset.Productionassetsthatrepresentthecapitalisedshareoftotalexpenditureontheexploration,appraisalanddevelopmentofoilandgasfieldsaredepreciatedovertheirexpectedusefullives.Thisappliesfromthedateproductioncommences,onaunitofproductionbasis,usingtheprovedand

notes to tHe annual



probabledevelopedreservesrecoverablefromthesefields.Thecarryingamountinrespectofeachfield(reservoir)isreviewedforimpairmentateachbalancesheetdate.Forevaluatedfields,thenetcarryingamountsarecomparedtotheestimatednetrevenuestobederivedfromtherelatedprovedandprobablereservesofoilandgaswithinthatfield.Evaluatedfieldsandotherassetsforwhichcarryingamountsarenotexpectedtobefullyrecoveredarewrittendowntotheirrecoverableamounts.

1.4.6 restoration costs

Costofproperty,plantandequipmentalsoincludestheestimatedcostsofdismantlingandremovingtheassetsandsiterehabilitationcosts.Estimateddecommissioningandrestorationcostsarebasedoncurrentrequirements,technologyandpricelevels.Provisionismadeforallnetestimatedrestorationcostsassoonasanobligationtorehabilitatetheareaexists,basedonthepresentvalueofthefutureestimatedcosts.Thesecostsaredeferredanddepreciatedovertheusefullivesoftheassetstowhichtheyrelateusingtheunitofproductionmethodbasedonthesamereservequantitiesasareusedforthecalculationofdepletionofoilandgasproductionassets.Anadditionalrestorationprovisionchargewillbemadetoincomeannually,basedontheriskfreerateofreturn.Changesinestimatesofreservequantitiesandrestorationcostsarerecognisedprospectively.

1.5 exploration, evaluation and development of oil and gas wells

The“successfulefforts”principleisusedtoaccountforoilandgasexplorationandevaluationactivities.

1.5.1 Pre‑licensing costsThesearecostsincurredpriortotheacquisitionofalegalrighttoexploreforoilandgas.Theymayincludespeculativeseismicdataandsubsequentgeologicalandgeophysicalanalysisofthisdata,butmaynotbeexclusivetosuchcosts.Ifsuchanalysissuggeststhe

presenceofreserves,thenthecostsarecapitalisedtoanidentifiedstructure(fieldorreservoir).However,iftheanalysisisnotdefinitivethenthesecostsareexpensedintheyeartheyareincurred.

1.5.2 exploration and evaluation costsAllcostsrelatingtotheacquisitionoflicences,explorationandevaluationofawell,fieldorexplorationareaarecapitalisedandreflectedasanintangibleasset(ifpotentialreservesarediscovered).

1.5.3 Assets pending determinationExploratorywellsthatdiscoverpotentiallycommercialreservesarecapitalisedpendingadecisiontofurtherdeveloporafirmplantodevelophasbeenapproved.Thesewellsmayremaincapitalisedforthreeyears.Ifnosuchplanordevelopmentexistsorinformationisobtainedthatraisesdoubtabouttheeconomicoroperatingviabilitythenthesecostswillberecognisedintheprofitorlossofthatyear.Ifaplanorintentiontofurtherdevelopthesewellsorfieldsexists,thecostsaretransferredtodevelopmentcosts.

1.5.4 Development costsCostsofdevelopmentwells,platforms,wellequipmentandattendantproductionfacilitiesarecapitalised.Thecostofproductionfacilitiescapitalisedincludesfinancecostsincurreduntiltheproductionfacilityiscompletedandreadyforthestartoftheproductionphase.Alldevelopmentwellsarenotdepreciateduntilproductionstartsandthentheyaredepreciatedontheunitsofproductionmethodcalculatedusingtheestimatedprovedreserves.

1.5.5 Dry wellsGeologicalandgeophysicalcosts,aswellasallothercostsrelatingtodryexploratorywellscosts,arerecognisedintheprofitandlossintheyeartheyareincurred.

1.6 Intangible assets

Anintangibleassetisanidentifiablenon‑monetaryassetwithoutphysicalsubstance.Intangibleassetsareinitiallyrecognisedatcostifacquiredseparatelyorinternallygeneratedoratfairvalueifacquiredaspartofabusinesscombination.



Ifassessedashavinganindefiniteusefullife,theintangibleassetisnotamortisedbuttestedforimpairmentannuallyandimpairedifnecessary.Ifassessedashavingafiniteusefullife,itisamortisedoveritsusefullifeusingastraightlinebasisandtestedforimpairmentifthereisanindicationthatitmaybeimpaired.

Researchcostsarerecognisedinprofitorlosswhenincurred.

Developmentcostsarecapitalisedonlyiftheyresultinanassetthatcanbeidentified;itisprobablethattheassetwillgeneratefutureeconomicbenefitsandthedevelopmentcostcanbereliablymeasured.Otherwiseitisrecognisedinprofitorloss.

1.7 ImpairmentAteachbalancesheetdate,thegroupreviewsthecarryingamountsofitstangibleandintangibleassetstodeterminewhetherthereisanyindicationthatthoseassetsmaybeimpaired.Ifsuchindicationexists,therecoverableamountoftheassetisestimatedinordertodeterminetheextentoftheimpairmentloss(ifany).Whereitisnotpossibletoestimatetherecoverableamountforanindividualasset,therecoverableamountisdeterminedforthecashgeneratingunittowhichtheassetbelongs.Valueinuseisestimatedtakingintoaccountfuturecashflows,forecastmarketconditionsandtheexpectedlivesoftheassets.Iftherecoverableamountofanasset(orcashgeneratingunit)isestimatedtobelessthanitscarryingamount,itscarryingamountisreducedtothehigherofitsrecoverableamountandzero.Impairmentlossesarerecognisedinprofitorloss.Subsequenttotherecognitionoftheimpairmentloss,thedepreciationoramortisationchargefortheassetisadjustedtoallocateitsremainingcarryingvalue,lessanyresidualvalue,overitsremainingusefullife.

Ifanimpairmentlossissubsequentlyreversed,thecarryingamountoftheasset(orcashgeneratingunit)isincreasedtotherevisedestimateofitsrecoverableamountbutlimitedtothecarryingamountthatwouldhavebeendeterminedhadanimpairmentlossnotbeenrecognisedinprioryears.Areversalofanimpairmentlossisrecognisedinprofitorloss.

1.8 LeasesLeasesareclassifiedasfinanceleasesoroperatingleasesattheinceptionofthelease.Financeleasesarerecognisedasassetsandliabilitiesatthelowerofthefairvalueoftheassetsandthepresentvalueoftheminimumleasepaymentsatthedateoftheacquisition.Financecostsrepresentthedifferencebetweenthetotalleasingcommitmentsandthefairvalueoftheassetsacquired.Financecostsarechargedtotheprofitandlossoverthetermoftheleaseattheinterestratesapplicabletotheleaseontheremainingbalanceoftheobligation.

Rentalspayableunderoperatingleasesarerecognisedinprofitorlossonastraightlinebasisoverthetermoftherelevantleasewheresignificantoranothersystematicbasisifmorerepresentativeofthetimepatternoftheuser’sbenefit.

Whenanoperatingleaseisterminatedbeforetheleaseperiodhasexpired,anypaymentrequiredtobemadetothelessorbywayofpenaltyisrecognisedasanexpenseintheperiodinwhichterminationtakesplace.

1.9 Inventories 1.9.1 Trading inventoryFinishedandintermediateinventoryismeasuredatthelowerofcostandnetrealisablevalueaccordingtotheweightedaveragemethod.Costincludesproductionexpenditure,depreciationandaproportionoftriennialturnaroundexpensesand

notes to tHe annual



replacementofcatalysts,aswellastransportandhandlingcosts.Thevalueofrawmaterialsandworkinprogresshasnotbeentakenintoaccountpriortoitreachingintermediatestoragetanks.Provisionismadeforobsolete,slowmovinganddefectiveinventories.

1.9.2 Spares, catalysts and chemicalsTheseinventoriesaremeasuredatthelowerofcostonaweightedaveragecostbasisandnetrealisablevaluelessappropriateprovisionforobsolescenceinarrivingatthenetrealisablevalue.

1.10 Taxation

Thechargeforcurrenttaxisbasedontheresultsoftheyearasadjustedforincomethatisexemptandexpensesthatarenotdeductibleusingtaxratesthatareapplicabletothetaxableincome.

Deferredtaxisrecognisedatlegislatedratesusingthebalancesheetliabilitymethod.Fullprovisionismadeforalltemporarydifferencesbetweenthetaxbaseofanassetorliabilityanditsbalancesheetcarryingamount.

Deferredtaxassetsarenotraisedinrespectofthedeferredtaxationonassessedlossesunlessitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichthedeferredtaxassetcanberealisedintheforeseeablefuture.

1.11 Translation of foreign currencies

1.11.1 TransactionsForeigncurrencytransactionsarerecognised,initiallyinRandbyapplyingtheforeigncurrencyamounttotheexchangeratebetweentheRandandtheforeigncurrencyatthedateofthetransaction,andisrestatedateachreportingdatebyusingtherulingexchangerateatthatdate.

1.11.2 Balance sheetAteachbalancesheetdate:(a)foreigncurrencymonetaryitemsaremeasuredusingtheclosingrate;

(b)non‑monetaryitems,whicharecarriedintermsofhistoricalcostdenominatedinaforeigncurrency,arereportedusingtheexchangerateatthedateofthetransaction;(c)non‑monetaryitemsthatarecarriedatfairvaluedenominatedinaforeigncurrencyarereportedusingtheexchangeratesthatexistedwhenthevaluesweredetermined.

1.11.3 exchange differencesExchangedifferencesarisingonthesettlementofmonetaryitemsoronreportingacompany’smonetaryitemsatratesdifferentfromthoseatwhichtheywereinitiallyrecordedduringtheperiod,orreportedinpreviousfinancialstatements,arerecognisedasincomeorexpensesintheperiodinwhichtheyarise.Exchangedifferencesarecapitalisedwheretheyrelatetothepurchaseorconstructionofproperty,plantandequipment.

1.11.4 foreign entitiesIntranslatingthefinancialstatementsofaforeignentityforincorporationinthegroupfinancialstatements,thefollowingisapplied:(a)Theassetsandliabilities,bothmonetaryandnon‑monetary,oftheforeignentityaretranslatedattheclosingexchangerateatthefinancialyearenddate;(b)Incomeandexpenseitemsoftheforeignentityaretranslatedattheweightedaverageratesofexchangefortheyear;(c)Allresultingexchangedifferencesaretakendirectlytotheforeigncurrencytranslationreserve,whichisclassifiedasanon‑distributablereserve.Ondisposaltherelatedamountinthisreservewillberecognisedinprofitorloss.

1.12 financial instruments 1.12.1 recognitionFinancialassetsandfinancialliabilitiesarerecognisedonthegroup’sandcompany’sbalancesheetwhenthecompanyandgroupbecomepartytothecontractualprovisionsoftheinstrument.Financialassetsandliabilitiesasaresultoffirm



commitmentsareonlyrecognisedwhenoneofthepartieshasperformedunderthecontract.Financialinstrumentsrecognisedonthebalancesheetincludecashandcashequivalents,tradereceivables,investments,tradepayables,andborrowings.

1.12.2 MeasurementFinancialassetsandliabilitiesareinitiallymeasuredatfairvalue,plustransactioncosts.Howevertransactioncostsoffinancialassetsandliabilitiesclassifiedasfairvaluethroughprofitorlossareexpensed.Subsequentmeasurementwilldependontheclassificationofthefinancialinstrumentasdetailedbelow.

1.12.3 financial assetsThegroup’sprincipalfinancialassetsareinvestmentsandloansreceivable,accountsreceivableandcashandcashequivalents.InvestmentsThefollowingcategoriesofinvestmentsaremeasuredatsubsequentreportingdatesatamortisedcostbyusingtheeffectiveinterestratemethod:(a)Loansandreceivablesoriginatedbythegroupwithfixedmaturity;(b)Heldtomaturityinvestments;(c)Aninvestmentthatdoesnothaveaquotedmarketpriceinanactivemarketandwhosefairvaluecannotbemeasuredreliablyusinganappropriatevaluationmodel.Loansandreceivableswithnofixedmaturityperiodandotherinvestmentsnotcoveredaboveareclassifiedasfairvaluethroughprofitandlossoninitialrecognition.Fairvalueforthispurposeismarketvalueiflistedoravaluederivedbyusinganappropriatevaluationmodel,ifunlisted.

Trade and other receivablesTradeandotherreceivablesareclassifiedasloansandreceivablesandaresubsequentlymeasuredatamortisedcost,lessanallowanceforanyuncollectableamounts.Anestimateforimpairmentismadewhenobjectiveevidenceisavailablethatindicatesthecollectionofanyamountoutstandingisnolongerprobable.Baddebtsarewrittenoffwhenidentified. CashandcashequivalentsCashandcashequivalentscomprisecashatbankandonhandandinstrumentsthatarereadilyconvertibletoknownamountsofcashandaresubjecttoaninsignificantriskofchangeinvalue.

1.12.4 financial liabilitiesThegroup’sprincipalfinancialliabilitiesareinterestbearingborrowings,accountspayableandbankoverdraft.

Allfinancialliabilitiesaremeasuredatamortisedcost,comprisingoriginaldebtlessprincipalpaymentsandamortisations,exceptforfinancialliabilitiesheldfortradingandderivativeliabilities,whicharesubsequentlymeasuredatfairvalue.Achangeinfairvalueisrecognisedinprofitorloss.

1.12.5 Derivative financial instrumentsDerivativefinancialinstruments,principallyinterestrateswapcontractsandforwardforeignexchangecontracts,areusedbythegroupandcompanyintheirmanagementoffinancialrisks.Derivativefinancialinstrumentsareinitiallymeasuredatfairvalueonthecontractdate,andarere‑measuredtofairvalueatsubsequentreportingdates.Paymentsandreceiptsunderinterestrateswapcontractsarerecognisedintheincomestatementonabasisconsistentwiththecorrespondingfluctuationsintheinterestpaymentonfloatingratefinancialliabilities.

notes to tHe annual



Thecarryingamountsofinterestrateswaps,whichcomprisenetinterestreceivablesandpayablesaccruedareincludedinassetsandliabilitiesrespectively.

1.12.6 Gains and losses on subsequent measurementAllgainsandlossesarisingfromachangeinfairvalueoforondisposalofheldfortradingfinancialassetsarerecognisedinprofitorloss.Gainsandlossesarisingfromachangeinthefairvalueofavailableforsalefinancialassetsarerecognisedinequity,untiltheinvestmentisdisposedoforisdeterminedtobeimpaired,atwhichtimethegainorlossisincludedintheprofitorlossfortheperiod.Gainsandlossesarisingfromcashflowhedgesarerecognisedinprofitorloss.Inrelationtofairvaluehedges,whichmeettheconditionsforhedgeaccounting,theportionofthegainorlossonahedginginstrumentthatisdeterminedtobeaneffectivehedgeisrecogniseddirectlyinequityandtheineffectiveportionisrecognisedinprofitorloss.Ifahedgedfirmcommitmentorforecastedtransactionresultsintherecognitionofanassetoraliability,thentheassociatedgainsorlossesrecognisedinequityareadjustedagainsttheinitialmeasurementoftheassetorliability.Forallothercashflowhedges,amountsrecognisedinequityareincludedinprofitorlossinthesameperiodduringwhichthecommitmentorforecastedtransactionaffectsprofitorloss.

1.12.7 DerecognitionAfinancialassetorpartthereofisderecognisedwhenthegrouprealisesthecontractualrightstothebenefitsspecifiedinthecontract,therightsexpire,thegroupsurrendersthoserightsorotherwiselosescontrolofthecontractualrightsthatcomprisethefinancialasset.On

derecognition,thedifferencebetweenthecarryingamountofthefinancialassetandthesumoftheproceedsreceivableandanyprioradjustmenttoreflectthefairvalueoftheassetthathadbeenreportedinequityisincludedinnetprofitorlossfortheperiod.

Afinancialliabilityorapartthereofisderecognisedwhentheobligationspecifiedinthecontractisdischarged,cancelledorexpires.Onderecognition,thedifferencebetweenthecarryingamountofthefinancialliability,includingrelatedunamortisedcostsandtheamountpaidforitisincludedinnetprofitorlossfortheperiod.

1.12.8 fair value considerationsThefairvaluesatwhichfinancialinstrumentsarecarriedatthebalancesheetdatehavebeendeterminedusingavailablemarketprices.Wheremarketpricesarenotavailable,fairvalueshavebeencalculatedbydiscountingexpectedfuturecashflowsatprevailinginterestrates.Thefairvalueshavebeenestimatedusingavailablemarketinformationandappropriatevaluationmethodologies,butarenotnecessarilyindicativeoftheamountsthatthegroupcouldrealiseinthenormalcourseofbusiness.Thecarryingamountsoffinancialassetsandfinancialliabilitieswithamaturityoflessthanoneyearareassumedtoapproximatetheirfairvaluesduetotheshort‑termtradingcycleoftheseitems.

1.12.9 offsettingFinancialassetsandfinancialliabilitiesareoffsetifthereisanintentiontoeithernettheassetandliabilityortorealisetheassetandsettletheliabilitysimultaneouslyandalegallyenforceablerighttosetoffexists.

1.13 Post‑employment benefit costs1.13.1 Defined contribution costsContributionstoadefinedcontributionplaninrespectofserviceinaparticularperiodarerecognisedasanexpenseinthatperiod.



1.13.2DefinedbenefitcostsCurrentservicecostsinrespectofdefinedbenefitplansarerecognisedasanexpenseinthecurrentperiod.Pastservicecosts,experienceadjustments,theeffectsofchangesinactuarialassumptionsandtheeffectsofplanamendmentsinrespectofexistingemployeesinadefinedbenefitplanarerecognisedinprofitorlosssystematicallyovertheremainingworklivesofthoseemployees(exceptinthecaseofshorterplanamendmentswheretheuseofashortertimeperiodisnecessarytoreflecttheeconomicbenefitsbytheenterprise).Theeffectsofplanamendmentsinrespectofretiredemployeesinabenefitplanaremeasuredasthepresentvalueoftheeffectoftheamendedbenefits,andarerecognisedasanexpenseorincomeintheperiodinwhichtheplanamendmentismade.Thecostofprovidingretirementbenefitsunderadefinedbenefitplanisdeterminedusingaprojectedunitcreditvaluationmethod.Actuarialgainsandlossesarerecognisedasincomeorexpenseinprofitorlossimmediately.Thegroupoperatesbothdefinedcontributionanddefinedbenefitplans,theassetsofwhichareheldinseparatetrusteeadministeredfunds.Theplansarefundedbypaymentsfromthegroupandemployees,takingaccountoftherecommendationsofindependentqualifiedactuaries.Fordefinedbenefitplansthedefinedbenefitobligation,therelatedcurrentservicecost,andwhereapplicable,thepastservicecostsaredeterminedbyusingtheprojectedunitcreditmethod.

1.13.3 other post‑employment obligationsPost‑employmenthealthcarebenefitsareprovidedtoretirees.Theentitlementtopostretirementhealthcarebenefitsisbasedontheemployeeremaininginserviceuptoretirementage.Theexpectedcostsofthesebenefitsareaccruedovertheperiodofemploymentusinganaccounting

methodologysimilartothatfordefinedbenefitpensionplans.Valuationsoftheseobligationsarecarriedoutannuallybyindependentqualifiedactuaries.

1.14 ProvisionsProvisionsarerecognisedwhenthecompanyandgrouphaveapresentobligationasaresultofapasteventanditisprobablethatthiswillresultinanoutflowofeconomicbenefitsthatcanbeestimatedreliably.Provisionsaremeasuredattheexpenditurerequiredtosettlethepresentobligation.

Thegroupisexposedtoenvironmentalliabilitiesrelatingtoitsoperations.Provisionforthecostofenvironmentalandotherremedialwork,suchasreclamationcosts,closedownandrestorationcostsismadewhensuchexpenditureisprobableandthecostcanbeestimatedwithareasonablerangeofpossibleoutcomes.

1.15 revenue recognitionRevenueisrecognisedwhenitisprobablethatfutureeconomicbenefitswillflowtotheenterpriseandthesebenefitscanbemeasuredreliably.ThemeasurementisattheamountreceivedorreceivablenetofVAT,cashdiscounts,rebatesandsettlementdiscounts.Revenuefromthesaleofgoodsisrecognisedwhensignificantrisksandrewardsofownershipofthegoodshavebeentransferredtothebuyer,whendeliveryhasbeenmadeandtitlehaspassed,whentheamountofrevenueandtherelatedcostscanbereliablymeasuredandwhenitisprobablethatthedebtorwillpayforthegoods.

Interestincomeisaccruedonatimeproportionbasis,takingintoaccounttheprincipalamountoutstandingandtheeffectiveinterestrateovertheperiodtomaturity.

Dividendincomefrominvestmentsisrecognisedwhentherighttoreceivepaymenthasbeenestablished.

notes to tHe annual



1.16 Borrowing costsBorrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassetsareaddedtothecostofthoseassets,untiltheassetsaresubstantiallyreadyfortheirintendeduseorsale.Qualifyingassetsareassetsthatnecessarilytakeasubstantialperiodtogetreadyfortheirintendeduseorsale.Investmentincomeearnedonthetemporaryinvestmentofspecificborrowingspendingtheirexpenditureonqualifyingassetsisdeductedfromthecostofthoseassets.Otherborrowingcostsarerecognisedasanexpenseintheperiodinwhichtheyareincurred.

1.17 Irregular and fruitless and wasteful expenditure

Irregularexpendituremeansexpenditureincurredincontraventionof,ornotinaccordancewith,arequirementofanyapplicablelegislation,includingthePFMA.Fruitlessandwastefulexpendituremeansexpenditurethatwasmadeinvainandwouldhavebeenavoidedhadreasonablecarebeenexercised.Anyirregularandfruitlessandwastefulexpenditureischargedagainstincomeintheperiodinwhichitis

incurred.

2. Standards and interpretationsNew accounting policies adopted ThegrouphasadoptedIFRS7‑FinancialInstruments:Disclosure.Theimpactofthisnewstandardhasresultedintheincreaseddisclosurerelatingtothesignificanceofthefinancialinstrumentsonthefinancialpositionandperformanceandthenatureandextentoftheriskarisingfromthesefinancialinstrumentstowhichitisexposedduringtheperiodandatyearendandthemannerinwhichitmanagestheserisks.

Standards and interpretations issued but not yet adoptedThefollowingaccountingstandards,interpretationsandamendmentstothepublishedaccountingstandardsthatarerelevanttoPetroSA,butnotyeteffective,havenotbeenadoptedinthecurrentyear:1. IFRS3Businesscombinations2. IAS1Presentationoffinancialstatements3. IAS23Borrowingcosts4. IAS27Consolidatedandseparatefinancial statements5. IAS32FinancialInstruments:PresentationTheeffectoftheadoptionofthesestandards,interpretationsandamendmentsrelatemainlytowordingandadditionaldisclosureinthefinancialstatements.Theadoptionoftheabovelistedstandardswillhavenomaterialimpactonthefinancialstatementsofthegroupintheperiodofinitialapplication.

3. Critical accounting estimates and judgments

InpreparingtheannualfinancialstatementsintermsofSAGAAP,thegroup’smanagementisrequiredtomakecertainestimatesandassumptionsthatmaymateriallyaffectreportedamountsofassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenuesandexpensesduringthereportedperiodandtherelateddisclosures.Astheseestimatesandassumptionsconcernfutureevents,duetotheinherentuncertaintyinvolvedinthisprocess,theactualresultsoftenvaryfromtheestimates.Theseestimatesandjudgmentsarebasedonhistoricalexperience,currentandexpectedfutureeconomicconditionsandotherfactors,includingexpectationsofthefutureeventsthatarebelievedtobereasonableunderthecircumstances.



4. Property, plant and equipment 4.1.Group

Cost/valuation

2008Accumulateddepreciation

Carryingamount

Cost/valuation


Carryingamount

R’000 R’000 R’000 R’000 R’000 R’000

Land 12,153 ‑ 12,153 12,153 ‑ 12,153Productionassets 19,834,489 16,180,671 3,653,818 17,741,622 15,548,978 2,192,644Furniture,fittings,officeequipmentandvehicles 458,349 217,090 241,259 240,618 195,660 44,958Shutdowncostcapitalised 371,218 239,629 131,589 354,902 118,301 236,601Restorationcosts 804,725 481,161 323,564 740,615 445,344 295,271Assetsunderdevelopment 840,045 ‑ 840,045 1,751,877 ‑ 1,751,877

22,320,979 17,118,551 5,202,428 20,841,787 16,308,283 4,533,504

Thecarryingamountsofproperty,plantandequipmentcanbereconciledasfollows:

2008

Carryingamountatbeginning

ofyear Additions

Exchangedifferencescapitalised Transfers Disposals

Changeinestimate Depreciation

Carryingamountatendofyear

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000Land 12,153 ‑ ‑ ‑ ‑ ‑ ‑ 12,153Productionassets 2,192,644 619,441 16,345 1,339,808 ‑ ‑ (514,420) 3,653,818Furniture,fittings,officeequipmentandvehicles 44,958 243,047 (25,359) (20) (72) ‑ (21,295) 241,259Shutdowncostcapitalised 236,601 16,317 ‑ ‑ ‑ ‑ (121,329) 131,589Restorationcosts 295,271 260,035 2,716 ‑ ‑ 30,444 (264,902) 323,564Assetsunderdevelopment 1,751,877 427,976 ‑ (1,339,808) ‑ ‑ ‑ 840,045

4,533,504 1,566,816 (6,298) (20) (72) 30,444 (921,946) 5,202,428

2007


ofyear Additions

Exchangedifferencescapitalised Transfers

Changeinestimate Depreciation


R’000 R’000 R’000 R’000 R’000 R’000 R’000Land 12,153 ‑ ‑ ‑ ‑ ‑ 12,153Productionassets 2,838,703 52,934 39,499 35,242 ‑ (773,734) 2,192,644Furniture,fittings,officeequipmentandvehicles 33,736 30,135 (187) (74) ‑ (18,652) 44,958Shutdowncostcapitalised ‑ 354,902 ‑ ‑ ‑ (118,301) 236,601Restorationcosts 107,279 ‑ 4,414 ‑ 414,604 (231,026) 295,271Assetsunderdevelopment 579,408 1,207,711 ‑ (35,242) ‑ ‑ 1,751,877

3,571,279 1,645,682 43,726 (74) 414,604 (1,141,713) 4,533,504

notes to tHe annual



4.2. Company

Cost/valuation


Carryingamount

Cost/valuation


Carryingamount

R’000 R’000 R’000 R’000 R’000 R’000Land 12,153 ‑ 12,153 12,153 ‑ 12,153Productionassets 18,313,107 14,973,710 3,339,397 16,463,123 14,529,405 1,933,718Furniture,fittings,officeequipmentandvehicles 438,330 206,293 232,037 231,743 187,394 44,349Shutdowncostcapitalised 371,218 239,629 131,589 354,902 118,301 236,601Restorationcosts 793,789 481,161 312,628 687,267 415,536 271,731Assetsunderdevelopment 840,045 ‑ 840,045 1,751,877 ‑ 1,751,877

20,768,642 15,900,793 4,867,849 19,501,065 15,250,636 4,250,429

Thecarryingamountsofproperty,plantandequipmentcanbereconciledasfollows:

2008


ofyear Additions Transfers DisposalsChangeinestimate Depreciation


R’000 R’000 R’000 R’000 R’000 R’000 R’000Land 12,153 ‑ ‑ ‑ ‑ ‑ 12,153Productionassets 1,933,718 510,176 1,339,808 ‑ ‑ (444,305) 3,339,397Furniture,fittings,officeequipmentandvehicles 44,349 208,379 (20) (72) ‑ (20,599) 232,037Shutdowncostcapitalised 236,601 16,317 ‑ ‑ ‑ (121,329) 131,589Restorationcosts 271,731 260,035 ‑ ‑ 43,106 (262,244) 312,628Assetsunderdevelopment 1,751,877 427,976 (1,339,808) ‑ ‑ ‑ 840,045

4,250,429 1,422,883 (20) (72) 43,106 (848,477) 4,867,849

2007

Carrying amount at beginning

of year Additions TransfersChange in estimate Depreciation

Carrying amount

at end of year

r’000 r’000 r’000 r’000 r’000 r’000Land 12,153 ‑ ‑ ‑ ‑ 12,153Productionassets 2,523,139 1,340 35,242 ‑ (626,003) 1,933,718Furniture,fittings,officeequipmentandvehicles 32,951 30,055 (74) ‑ (18,583) 44,349Shutdowncostcapitalised ‑ 354,902 ‑ ‑ (118,301) 236,601Restorationcosts 81,930 ‑ ‑ 405,901 (216,100) 271,731Assetsunderdevelopment 579,408 1,207,711 (35,242) ‑ ‑ 1,751,877

3,229,581 1,594,008 (74) 405,901 (978,987) 4,250,429



Aregisteroflandandbuildingsisavailableforinspectionbymembersortheirnomineesattheregisteredofficeofthecompany. Restorationexpenditurerelatestotheprovisionforrestorationcostsandisamortisedonaunits‑of‑productionbasisovertheexpectedusefullifeofthereserves.TheMineralsActof1991requiresthatamountsforrestorationbesetasideasprescribedintheAct.TherestorationfundrequirementhasbeenmetthroughtheissueofaguaranteebyCEF(Pty)Ltd.

Group Company

2008 2007 2008 2007

r’000 r’000 r’000 r’000

4.3 Production assets

Ownedproductionassetsatcost

19,834,48917,741,622

18,313,107

16,463,123

5. assets pending determination

Balanceatthebeginningoftheyear 54,793 54,793 54,793 54,793

Assetspendingdeterminationat31March2008consistofexpenditureinrespectofexplorationactivities,whichhavebeeninitiallycapitalisedpendingadeterminationoftheeconomicreserves.Theaccountingpolicy(refertonote1.5)recommendsthatintangibleassetsofthisnatureshouldberecognisedasproductionassetsafteraperiodof3yearsorexpended.AssetspendingdeterminationconsistofthewellA‑X1,whichiswithinBlock2A.AdevelopmentplanwassenttothePetroleumAgencyofSouthAfricaforapproval.

notes to tHe annual



Group Company2008 2007 2008 2007r’000 r’000 r’000 r’000

6. Investments in subsidiaries

PetroSA Synfuel International (Pty) Ltd (100%)

‑ ‑ ‑ ‑

Shares ‑ ‑ 501 501Provisionforimpairment ‑ ‑ (501) (501)

PetroSA Sudan (Pty) Ltd (100%) ‑ ‑ ‑ ‑Shares ‑ ‑ 0.12 0.12Loans ‑ ‑ (0.12) (0.12)

Petroleum oil and Gas Corporation of South Africa (Namibia) (Pty) Ltd (100%)

‑ ‑ ‑ ‑

Shares ‑ ‑ 0.12 0.12Loans ‑ ‑ (0.12) (0.12)

PetroSA North America (100%) ‑ ‑ ‑ ‑Shares ‑ ‑ 0.07 0.07Loans ‑ ‑ (0.07) (0.07)

PetroSA egypt (Pty)Ltd(100%) ‑ ‑ ‑ ‑Shares ‑ ‑ 0.10 0.10Loans ‑ ‑ (0.10) (0.10)

PetroSA Nigeria Limited (100%) ‑ ‑ 1,970 1,688Shares ‑ ‑ 1,235 1,235Loans ‑ ‑ 735 453

PetroSA europe BV (100%) ‑ ‑ 166 166Shares ‑ ‑ 166 166

PetroSA Brass (Pty) Ltd (100%) ‑ ‑ ‑ ‑Shares ‑ ‑ 0.06 0.06Loans ‑ ‑ (0.06) (0.06)

PetroSA Gryphon Marin Permit (Pty) Ltd (100%)

‑ ‑ ‑ ‑

Shares ‑ ‑ 0.06 0.06Loans ‑ ‑ (0.06) (0.06)



Group Company2008 2007 2008 2007r’000 r’000 r’000 r’000

6. Investments in subsidiaries continued

PetroSA Iris (Pty) Ltd (100%) ‑ ‑ ‑ ‑Shares ‑ ‑ 0.06 0.06Loans ‑ ‑ (0.06) (0.06)

PetroSA Themis (Pty) Ltd (100%) ‑ ‑ ‑ ‑Shares ‑ ‑ 0.12 0.12Loans ‑ ‑ (0.12) (0.12)

PetroSA equatorial Guinea (Pty) Ltd (100%) ‑ ‑ ‑ ‑Shares ‑ ‑ 0.06 0.06Loans ‑ ‑ (0.06) (0.06)

Total ‑ 2,137 1,854Shares ‑ ‑ 1,903 1,903Loans ‑ ‑ 735 452Provisionsforimpairment ‑ ‑ (501) (501)

notes to tHe annual



7. Intangible assets

Group Cost / valuation

2008 Accumulated amortisation

Carrying value

Cost / valuation

2007 Accumulated amortisation

Carrying value

r’000 r’000 r’000 r’000 r’000 r’000EquatorialGuinea‑Licensingfee 79,162 ‑ 79,162 79,162 ‑ 79,162Software 1,142 1,048 94 1,120 1,046 74

80,304 1,048 79,256 80,282 1,046 79,236

Thecarryingamountsofintangibleassetscanbereconciledasfollows:

Carryingvalueatbeginningof

year Additions Transfers

Carryingvalueatend

ofyearR’000 R’000 R’000 R’000

EquatorialGuinea‑Licensingfee 79,162 ‑ ‑ 79,162Software 74 20 94

79,236 ‑ 20 79,256

Carryingvalueatbeginningof

year Additions TransfersCarryingvalueatendofyear

R’000 R’000 R’000 R’000EquatorialGuinea‑Licensingfee 71,998 7,164 ‑ 79,162Software ‑ 74 74

71,998 7,164 74 79,236

Cost/valuation

2008Accumulatedamortisation

Carryingvalue

Cost/valuation

2007Accumulatedamortisation

Carryingvalue

R’000 R’000 R’000 R’000 R’000 R’000Software 1,142 1,048 94 1,120 1,046 74

Thecarryingamountsofintangibleassetscanbereconciledasfollows:Carryingvalueat

beginningofyear Transfers

Carryingvalueatendofyear

R’000 R’000 R’000

Software 74 20 94

Carryingvalueat

beginningofyear Transfers

Carryingvalueatendofyear

R’000 R’000 R’000Software ‑ 74 74

2007

2008

2007

Company

2008



Group Company

2008 2007 2008 2007

r’000 r’000 r’000 r’000

8. Investments in associate companies

Associatecompanies

11,019

25,609 31,123 31,123

8.1.Carrying value of investment in GTL.f1 AG

37.5%interestinunlistedsharesofGTL.F1AG,acompanyincorporatedinSwitzerlandandinvolvedinthemarketingofproventechnology.

Carryingvalueofinvestment:

Sharesatcost 23,490 23,490 23,490 23,490Accumulatedlossessinceacquisition (22,579) (8,901) ‑ ‑

911 14,589 23,490 23,490

SummaryfinancialinformationofGTL.F1AG

AssetsNon‑current 22,923 10,640 ‑ ‑Current 84,131 51,432 ‑ ‑ 107,054 62,072 ‑ ‑

equity and liabilitiesEquityandreserves 39,918 53,756 ‑ ‑Non‑currentliabilities ‑ ‑ ‑ ‑Currentliabilities 67,136 8,316 ‑ ‑ 107,054 62,072 ‑ ‑

Netloss (29,542) (22,634) ‑ ‑

8.2.Carrying value of investment in Sud‑Chemie Zeolites (Pty) Ltd

30%interestinunlistedsharesofSud‑ChemieZeolites(Pty)Ltd,acompanyincorporatedinSouthAfricaandinvolvedintheproductionofcatalysts.

Carryingvalueofinvestment:

Sharesatcost 12,176 12,176 7,633 7,633Accumulatedlossessinceacquisition (2,068) (1,156) ‑ ‑

10,108 11,020 7,633 7,633

notes to tHe annual



Group Company

2008 2007 2008 2007

r’000 r’000 r’000 r’0008. Investments in associate companies continued

SummaryfinancialinformationofSud‑ChemieZeolites(Pty)Ltd

AssetsNon‑current 33,744 28,413 ‑ ‑Current 17,833 32,130 ‑ ‑ 51,577 60,543 ‑ ‑

equity and liabilitiesEquityandreserves 33,691 36,731 ‑ ‑Non‑currentliabilities 3,948 5,845 ‑ ‑Currentliabilities 13,938 17,967 ‑ ‑ 51,577 60,543 ‑ ‑

Net(loss)/profit (140) 2,470 ‑ ‑

9. loans receivable

ForestOilGryphonMarin 1,603 1,603 1,603 1,603BrassExplorationUnlimited ‑ ‑ 289,747 255,250PetroSAEgypt ‑ ‑ 19,382 ‑Lurgi 113,286 80,425 113,286 80,425PetroSAEquatorialGuinea ‑ ‑ 220,161 149,191GTL.F1 18,517 ‑ 18,517 ‑PetroSASudan ‑ ‑ 135,903 ‑PetroSANorthAmerica ‑ ‑ 2,118 ‑ 133,406 82,028 800,717 486,469

TheloantoBrassincursinterestatLIBOR+14%,whiletheloantoForestOilisinterestfree.

TheamountowingbyLurgiisinrespectofapurchaseofa12.5%shareinthePetroSAStatoilJointVenture.TheloanaccruesinterestatEUROBOR+3%.TheloanisrepayablebasedondividendsreceivablebyLurgifromtheGTL.F1AGtechnologycompany.

TheloanstoPetroSAEquatorialGuinea(Pty)Ltd;PetroSASudan(Pty)LtdandPetroSAEgypt(Pty)LtdforR220.2million;R135.9millionandR19.3millionrespectivelyhavenofixedrepaymenttermsandinterestaccruesatprime+2%.TheloanforPetroSANorthAmericaalsohasnofixedrepaymenttermsandaccruesinterestatLIBOR+2%.PetroSAhassubordinatedtheseloansinfavourofothercreditorsoftheabove‑mentionedcompaniesuntilsuchtimethattheassetsfairlyvaluedexceedtheliabilities.



notes to tHe annual

Group Company

2008 2007 2008 2007

r’000 r’000 r’000 r’000

10. amounts held by holding company

CEF(Pty)Ltd 537,648 537,648 537,648 537,648

ThisdepositisbeingheldbyCEF(Pty)LtdassecurityforguaranteesissuedbyitselftothirdpartiesonbehalfofPetroSA.

11. Inventories

Theamountsattributabletothedifferentcategoriesareasfollows:Petroleumfuels 1,221,413 599,342 1,221,413 599,342Consumablestores,sparesandcatalysts 599,052 280,243 594,289 276,120Crudeoil 49,748 92,760 31,875 57,920 1,870,213 972,345 1,847,577 933,382

12. trade and other receivables

Tradereceivables 1,778,143 1,317,832 1,515,466 1,225,192Sundryreceivables 467,116 145,628 518,497 184,308Provisionfordoubtfuldebt (25,562) (13,948) (25,562) (13,948) 2,219,697 1,449,512 2,008,401 1,395,552Pre‑payments 140,690 108,222 131,948 89,419 2,360,387 1,557,734 2,140,349 1,484,971TheprovisionfordoubtfuldebtconsistsofthreecustomeraccountbalancesandthebalanceisagedasR14,5million(2007:R13,9million)atover120daysandR11millionisbetween90‑120days.

Movementinprovisionfordoubtfuldebtsisasfollows:

Balanceatbeginningofyear 13,948 13,404 13,948 13,404Impairmentlossesrecognisedonreceivables 12,364 1,051 12,364 1,051Amountsrecoveredduringtheyear (750) (507) (750) (507 25,562 13,948 25,562 13,948



Group Company

2008 2007 2008 2007

r’000 r’000 r’000 r’000

13. Cash and cash equivalentsShort‑terminvestmentsinmoneymarketandcashonhand

12,855,773 11,240,693 11,833,490 10,398,664

Termdeposits 20,117 17,231 ‑ ‑12,875,890 11,257,924 11,833,490 10,398,664

Bankoverdraft ‑ (236,643) ‑ (236,643)

Balanceatendofyear 12,875,890 11,021,281 11,833,490 10,162,021

AtermdepositofR20077025isheldinthecompanyEnergyAfricaRehabilitation(associationincorporatedunders21),andiscommittedsolelyfortheabandonmentexpenditurefortheOribifield.

14. Share capital

Authorised5,000ordinarysharesofR1each 5 5 5 5

Issued1,914ordinarysharesofR1each 2 2 2 2Sharepremium 2,755,934 2,755,934 2,755,934 2,755,934 2,755,936 2,755,936 2,755,936 2,755,936

15. long‑term loans: shareholder’s loans

CEF(Pty)LtdThisunsecuredUSdollarloanisrepayableinequalhalf‑yearlyinstalmentsofUSD3097879(R25136501)withafinalinstalmentofUSD2492115(R20221274)dueon28February2010.Interestrate‑floatingtoLIBOR.

95,631 130,815 95,631 130,815

CEF(Pty)LtdThisunsecuredUSdollarloanisrepayableinequalhalf‑yearlyinstalmentsofUSD2456286(R19930550)withafinalinstalmentdueon15September2010.Interestrate‑floatingtoLIBOR.

99,652 125,087 99,652 125,087

Less:Short‑termportionoflong‑termloans (90,134) (80,813) (90,134) (80,813)

105,149 175,089 105,149 175,089



Group Company

2008 2007 2008 2007

r’000 r’000 r’000 r’000

16. Deferred tax

16.1. Deferred tax liabilitiesBalanceatbeginningofyear 139,958 90,469 ‑ ‑Movementsduringyearattributableto:Chargedtotheprofitorloss 283,331 49,489 307,060 ‑Balanceatendofyear 423,289 139,958 307,060 ‑

Thebalancecomprises:Capitalallowances 1,069,324 144,381 913,680 ‑Provision (693,693) (97,828) (629,502) ‑Unrealisedexchangedifferences 24,776 1 ‑ ‑Taxexpense ‑ 93,404 ‑ ‑Loans 22,882 ‑ 22,882 ‑

423,289 139,958 307,060 ‑

notes to tHe annual



17. Provisions

Group

Carrying amount at

beginning of year

Additional provisions

exchange differences

Current year interest expense

Change in estimate

Carrying amount at end of year

2008 r’000 r’000 r’000 r’000 r’000 r’000Restorationcosts 3,072,045 261,912 10,241 252,968 30,444 3,627,610Post‑retirementmedicalaidbenefits 172,130 34,285 ‑ ‑ ‑ 206,415Bonus 134,000 ‑ ‑ ‑ (43,500) 90,500

3,378,175 296,197 10,241 252,968 (13,056) 3,924,525

Group

Carrying amount at

beginning of year




Change in estimate

Carrying amount at end

of year2007 r’000 r’000 r’000 r’000 r’000 r’000Restorationcosts 2,423,379 ‑ 11,810 222,252 414,604 3,072,045Post‑retirementmedicalaidbenefits 173,759 (1,629) ‑ ‑ ‑ 172,130Bonus 120,000 ‑ ‑ ‑ 14,000 134,000

2,717,138 (1,629) 11,810 222,252 428,604 3,378,175

Company

Carrying amount at beginning of

yearAdditional provisions


Change in estimate

Carrying amount at end of year

2008 r’000 r’000 r’000 r’000 r’000Restorationcosts 2,959,763 260,035 245,271 43,105 3,508,174Post‑retirementmedicalaidbenefits 172,091 34,285 ‑ ‑ 206,376Bonus 134,000 ‑ ‑ (43,500) 90,500

3,265,854 294,320 245,271 (395) 3,805,050

Company

Carrying amount at

beginning of year




Change in estimate

Carrying amount at end

of year2007 r’000 r’000 r’000 r’000 r’000 r’000Restorationcosts 2,338,027 ‑ ‑ 215,835 405,901 2,959,763Post‑retirementmedicalaidbenefits 173,759 (1,629) (39) ‑ ‑ 172,091Bonus 120,000 ‑ ‑ ‑ 14,000 134,000

2,631,786 (1,629) (39) 215,835 419,901 3,265,854



Group Company

2008 2007 2008 2007

r’000 r’000 r’000 r’000

17. Provisions continuedNon‑current 3,834,025 3,244,175 3,714,550 3,131,854Current 90,500 134,000 90,500 134,000

3,924,525 3,378,175 3,805,050 3,265,854

18. trade and other payables

Tradepayables 1,418,489 655,329 1,364,648 623,420Accruals 957,410 400,131 808,090 285,125

2,375,899 1,055,460 2,172,738 908,545

notes to tHe annual

19. Employee benefits

Itisthepolicyofthegrouptoprovideretirementbenefitsforallitseligiblepermanentemployees.AlleligiblepermanentemployeesareeithermembersoftheMossgasPensionFund,adefinedbenefitfund,orPetroSARetirementFund,adefinedcontributionfund,bothsubjecttothePensionFundsAct,1956.

19.1 Pension and retirement funds

19.1.1 Defined benefit pension plan

Soekor retirement fund ThevaluationoftheSoekorRetirementFundasat1January2002showedasurplusasatthatdateofR34million,reflectingassetsofapproximatelyR82millionandliabilitiesofapproximatelyR46million.NocontributionwasrecognisedasanexpenseduringtheyearasallemployeesweretransferedtothePetroSARetirementFund.Thecompanyisuncertainoftheextentofitsentitlementtothesurplusandhasnotaccountedforitpendingfinalisationoftheactuarialvaluation.ThetrusteesareintheprocessofasurplusapportionmentintermsofthePensionFundsSecondAmendmentAct,afterwhichthefundwillbedissolved.

PetroSA retirement fund ThecompanyoperatesadefinedcontributionretirementplanforthebenefitofemployeeswhoarenotmembersoftheMossgasPensionFund.Allemployeeswhocommencedemploymentafter1April1996qualifyformembershipofthisfund.TheamountrecognisedasanexpenseduringtheyearunderreviewwasR57,4million(2007:R49,1million)fortheretirementfund.

19.2 Medical benefitsPostretirementmedicalaidbenefitsThegrouphasprovidedanamountofR201,2million(2007:R172,1million)towardsthefundingofpost‑retirementmedicalschemecostsforemployeeswhocommencedemploymentbefore1April2006andpensioners.Thiscommitmentisactuariallyvaluedannually,themostrecentvaluationperformedasat31March2008.Theactuary’srecommendationthatredemptionofR1,7millionbemadeforthepreviousfinancialyearwasimplemented,withthecreditmadeagainstincome.Employeeswhocommencedemploymentafter1April2006arenotentitledtothisbenefit.Theactuarialpresentvalueofpromisedretirementmedicalbenefitsat31March2008isR201,2million.Theobligationisunfundedandwasvaluedusingtheprojectedunitmethod.Adiscountrateof10%andmedicalaidinflationrateof8%wasassumed.MortalityassumptionswereinlinewithstandardtablesSA56/62(inservice)andPA(90)(inretirement).Asensitivityanalysiswasperformedonthemedicalaidinflation



rateassumptionusedinthevaluation.A9%and7%medicalaidinflationrateassumptionwouldresultinanaccumulatedobligationat31March2008ofR215,8millionandR189,0millionrespectively.ThecombinedinterestandservicecostsvaryaccordingtothemedicalaidinflationassumptionsandareR26,1million(8%);R27,3million(9%)andR23,1million(7%).

20. Financial instruments

20.1 IntroductionThegrouphasariskmanagementandcentraltreasuryfunctionthatmanagesthefinancialrisksrelatingtothegroup’soperations.Thegroup’sliquidity,credit,foreignexchange,interestrateandcrudeoilpricerisksaremonitoredcontinually.Approvedpoliciesexistformanagingtheserisks.

20.2 risk profileInthecourseofthegroup’sbusinessoperationsitisexposedtoliquidity,credit,foreignexchange,interestrateandcrudeoilpricerisk.Theriskmanagementpolicyofthegrouprelatingtoeachoftheserisksisdiscussedbelow.

20.3 risk management objectives and policiesThegroup’sobjectiveinusingfinancialinstrumentsistoreducetheuncertaintyoverfuturecashflowsarisingfrommovementsinforeignexchange,interestratesandcrudeoilprices.Throughouttheyearunderreviewithasbeen,andremains,thegroup’spolicythatnospeculativetradinginderivativeinstrumentsbeundertaken.

20.4 foreign currency managementThegroupisexposedtoforeigncurrencyfluctuationsasitraisesfundingontheoffshorefinancialmarkets,importsrawmaterialandsparesandfurthermoreexportsfinishedproductandcrudeoil.Alllocalsalesoffinishedproductsaresoldonaforeigncurrencydenominatedbasis.Thegrouptakescoveronforeignexchangetransactionswherethereisafuturecurrencyexposure.Thegroupalsomakesuseofanaturalhedgesituationtomanageforeigncurrencyexposure.Asensitivityanalysiswasdonefortheneteffectonrevenueandexpenses,andtheweakeningorstrengtheningoftheRand/DollarexchangeratebyR1basedonactualrevenueandcostwillincreaseordecreaseprofitbyR909,8million

respectively. FinancialAssetsThegroupismainlyexposedtofluctuationintheEUR,CHFandUSD.Thegroupmeasuresitsmarketriskexposurebyrunningvarioussensitivityanalysesincluding10%favourableandadversechangesinthekeyvariables.Thesensitivityanalysesincludeonlyoutstandingforeigncurrencydenominatedmonetaryitemsandadjuststheirtranslationattheperiodendfora10%changeinforeigncurrencyrates.

Asat31March2008a10%increaseinZARagainsttherelevantcurrencieswouldhaveresultedinadecreaseinforeigncurrencydenominatedassetsofR122,7million(2007:R105million)anda10%decreaseinZARagainsttherelevantcurrencieswouldhaveresultedinanincreaseinforeigncurrencydenominatedassetsofR122,7million(2007:R105million). FinancialLiabilities ThegroupismainlyexposedtofluctuationintheEUR,GBPandUSD.Thegroupmeasuresitsmarketriskexposurebyrunningvarioussensitivityanalysesincluding10%favourableandadversechangesinthekeyvariables.Thesensitivityanalysesincludeonlyoutstandingforeigncurrencydenominatedmonetaryitemsandadjuststheirtranslationattheperiodendfora10%changeinforeigncurrencyrates.Asat31March2008a10%increaseinZARagainsttheUSDollarwouldhaveresultedinadecreaseinforeigncurrencydenominatedliabilitiesofR30,7million(2007:R46million)anda10%decreaseinZARagainstUSDollarwouldhaveresultedinanincreaseinforeigncurrencydenominatedliabilitiesofR30,7million(2007:R46million).

20.5 Interest rate risk managementExposuretointerestrateriskonliabilitiesandinvestmentsismonitoredonaproactivebasis.Thefinancingofthegroupisstructuredonacombinationoffloatingandfixedinterestrates.

Thefollowingtablesetsoutthecarryingamount,bymaturity,ofthegroup’sfinancialinstrumentsthatareexposedtointerestrateriskandtheeffectiveinterestratesapplicable:



CompanyYear ended 31 March 2008Fixedrate rate < 1 year 1‑5 years > 5 years Non Interest Bearing r’000 r’000 r’000 r’000

Cashandcashequivalents11.38% 6,501,359 ‑ ‑ ‑Cashondeposit11.06% 537,648 ‑ ‑ ‑

Floatingrate rate < 1 year 1‑5 years > 5 years Non Interest Bearing r’000 r’000 r’000 r’000

Cashandcashequivalents11.47% 5,333,244 ‑ ‑ ‑ForestOilGryphonMarinloan0% ‑ ‑ ‑ 1,603Foreignloan‑USD3.43% (90,134) (105,149) ‑ ‑Tradereceivables ‑ ‑ ‑ 2,140,349Tradepayables ‑ ‑ ‑ (2,172,738)BrassExplorationUnlimitedloan16.5% ‑ ‑ 289,747 ‑Lurgi5.54% ‑ ‑ 113,286 ‑PetroSAEgypt16.5% ‑ ‑ 19,382 ‑PetroSANorthAmerica4.69% ‑ ‑ 2,118 ‑PetroSASudan16.5% ‑ ‑ 135,903 ‑GTL.F10% ‑ ‑ ‑ 18,517PetroSAEquatorialGuinea16.5% ‑ ‑ 220,161 ‑

Yearended31March2007

Fixedrate rate < 1 year 1‑5 years > 5 years Non Interest Bearing r’000 r’000 r’000 r’000

Cashandcashequivalents9.13% 9,732,764 ‑ ‑ 6,000Cashondeposit9.07% 537,648 ‑ ‑ ‑

notes to tHe annual



Floatingrate rate < 1 year 1‑5 years > 5 years Non Interest Bearing r’000 r’000 r’000 r’000Cashandcashequivalents8.57% 472,641 ‑ ‑ ‑PetroSAEquatorialGuinea14.5% ‑ ‑ 149,191 ‑Foreignloan‑USD5.87% (80,813) (175,089) ‑ ‑Tradereceivables ‑ ‑ ‑ 1,484,971ForestOilGryphonMarinloan0% ‑ ‑ ‑ 1,603BrassExplorationUnlimitedloan19.35% ‑ ‑ 255,250 ‑Lurgi6.9% ‑ ‑ 80,425 ‑Tradepayables ‑ ‑ ‑ (908,545)Bankoverdraft‑USD6.48% (199,731) ‑ ‑ ‑

financial assetsThegroupismainlyexposedtofluctuationinUSDLIBOR,EURIBORandZARinterestrates.Thegroupmeasuresitsinterestrateriskexposurebyrunningvarioussensitivityanalysesincluding10%favourableandadversechangesinthekeyvariables.Thesensitivityanalysesincludeonlyinterestbearingmonetaryitemsandadjuststheirvalueattheperiodendfora10%changeininterestrates.Asat31March2008a10%relativechangeinthe:a)ZARinterestratewouldhaveimpactedonprofitandlossfortheyearbyR1,3billion(2007:R1,09billion)b)EURIBORinterestratewouldhaveimpactedonprofitandlossfortheyearbyR8,5million(2007:R8,04million)c)USDLIBORinterestratewouldhaveimpactedonprofitandlossfortheyearbyR29,2million(2007:R25,5million).financial liabilities ThegroupismainlyexposedtofluctuationinUSDLIBOR.Thegroupmeasuresitsinterestrateriskexposurebyrunningvarioussensitivityanalysesincluding10%favourableandadversechangesinthekeyvariables.Thesensitivityanalysesincludeonlyinterestbearingmonetaryitemsandadjuststheirvalueattheperiodendfora10%changeininterestrates.Asat31March2008a10%relativechangeintheUSD

LIBORinterestratewouldhaveimpactedprofitandlossfortheyearbyR19,5million(2007:R37,3million).

20.6 Credit risk managementFinancialassets,whichpotentiallysubjectthegrouptoconcentrationsofcreditrisk,pertainprincipallytotradereceivablesandinvestmentsintheSouthAfricanmoneymarket.Tradereceivablesarepresentednetoftheallowancefordoubtfuldebts.Theexposuretocreditriskwithrespecttotradereceivablesisnotconcentratedduetoalargecustomerbase.Thegroupmanagescounter‑partyexposuresarisingfrommoneymarketandderivativeinstrumentsbyonlydealingwithwell‑establishedfinancialinstitutionsofahighcreditrating.Lossesarenotexpectedasaresultofnon‑performancebythesecounterparties.CreditlimitswithfinancialinstitutionsarerevisedandapprovedbytheBoardquarterly.

20.7 Cross currency interest rate swapSetoutbelowisthemark‑to‑market(MTM)valuationoftheinterestandforeignexchangeportionofthecrosscurrencyinterestrateswap.



Company 2008 2007 r’000 r’000 fair fair value value

financial assetsAssetfromforeignexchangeportion 5,564 ‑Assetfrominterestportion 2,352 ‑

financial liabilitiesLiabilityfromforeignexchangeportion ‑ 7,466Liabilityfrominterestportion ‑ 836

Asat31March2008theinterestrateandforeignexchangederivativepositionrelatingtothecrosscurrencyinterestrateswapwasin‑the‑moneytoanamountofR7.9million(2007:out‑of‑the‑moneytoanamountofR8.29million)andduetoimmaterialitynosensitivityanalysishasbeenperformedonthepositionin2007and2008.

20.8 Categories of financial instrumentsAtyear‑endtherearenosignificantconcentrationsofcreditriskforloanreceivablesdesignatedasfairvaluethroughprofitandloss(FVTPL).Thecarryingamountreflectedbelowrepresentsthemaximumexposuretocreditriskforsuchloanreceivables.

Company

2008 2007 r’000 r’000

financial Assets:LoanreceivabledesignatedasFVTPL 800,717 486,469Loansandreceivables(includingcashandcashequivalents) 14,511,487 12,184,640financial Liabilities:Amortisedcost 2,368,021 1,164,447

20.9 Market riskThegroup’sactivitiesexposeitprimarilytothefinancialrisksofchangesincommoditypricesandforeigncurrencyexchangerates.Referto20.4forforeigncurrencyriskmanagementand20.13forpriceriskmanagement.

20.10 forward exchange contractsThecompanyhasenteredintocertainforwardexchangecontractsthatdonotrelatetospecificitemsappearingonthebalancesheetbutwhichwereenteredintotocoverforeigncommitmentsnotyetdueandproceedsnotyetreceived.Thecontractswillbeutilisedforpurposesoftrade.

notes to tHe annual



20.11 forward exchange contracts ‑ liability

Company fair value estimated fair value gain 2008 2007 2008 2007 r’000 r’000 r’000 r’000

Forwardexchangecontracts 799,050 433,660 20,473 599

Totalforeigncurrency2008 Averageforward

exchangerateDateofmaturity

87,046,659USD 8.1238 Lessthan3months9,481,024USD 8.2171 3to6months866,175GBP 16.1594 Lessthan3months

2007 54,727,204USD 7.302 Lessthan3months4,611,165USD 7.366 3to6months

Asat31March2007,a10%relativechangeintheUSDtotheZARwouldhaveimpactedonprofitandlossfortheyearbyR72,1million(2007:R43,4million).

Asat31March2008,a10%relativechangeintheEURtotheZARwouldhaveimpactedonprofitandlossfortheyearbyR7,7million(2007:n.a.).

20.12 Liquidity riskThegroupmanagesliquidityriskbymonitoringforecastcashflowsandensuringthatadequatecashresourcesareavailabletomeetcashcommitments.

20.13 Price riskExternalsalesandpurchasesaresubjecttopriceandbasisrisksassociatedwithvolumeandtimingdifferences.

Priceriskismitigatedusingvariousoperationalandfinancialinstruments.Instrumentsusedareliquidandcanbetradedandvaluedatanytime.Thehedgeportfoliomayconsistofexchange‑tradedoptionsandfuturesaswellasnon‑exoticoverthecounteroptionsandswaps.Options,however,areonlytradedwithinzerocostcollars.ThesellingpricesarehedgedusingtheInternationalPetroleumExchange(IPE),NewYorkMercantileExchange(Nymex),orSingaporeMonetaryExchange(Simex).

Asensitivityanalysiswasperformedforrevenueandevery$1increaseordecreaseintheBrentcrudeoilpricewillincreaseordecreaseprofitbyR70,9millionrespectively,basedonthe2007/8financialresults.

20.14 Maturity riskThematurityprofilesoffinancialassetsandfinancialliabilitiesatbalancesheetdateareasfollows:



notes to tHe annual

Company1 year or less

r’0001 to 5 years

r’000over 5 years

r’000Year ended 31 March 2008AssetsCash 11,833,490 ‑ ‑ Tradereceivables 2,140,349 ‑ ‑

Totalfinancialassets 13,973,839 ‑ ‑

LiabilitiesInterest‑bearingborrowings 90,134 105,149 ‑Tradepayables 2,172,738 ‑ ‑

Totalfinancialliabilities 2,262,872 105,149 ‑

1 year or less r’000

1 to 5 years r’000

over 5 years r’000

Year ended 31 March 2007Assets

Totalfinancialassets 11,646,992 ‑ ‑

Liabilities

Totalfinancialliabilities 966,231 175,088 ‑



Group Company 2008 2007 2008 2007 r’000 r’000 r’000 r’000

21. Revenue

Grossrevenuerepresentstheinvoicedvalueofcrudeoilandfuelsalesandothergoodsandservicessupplied,excludingvalueaddedtax.

Majorclassesofrevenuecomprise:Crudeoilsales 1,728,192 2,092,413 992,711 1,235,527Salesfromfuelproduction 9,290,580 6,859,343 9,290,580 6,859,343 11,018,772 8,951,756 10,283,291 8,094,870

22. operating profit

Operatingprofitisstatedafter:

22.1. IncomeIncomefromsubsidiaries

Administrationfees ‑ ‑ 38,432 3,480Profitonforeignexchange ‑ 440,522 13,312 440,113Baddebtsrecovery 750 507 750 507Insuranceproceeds ‑ 83,000 ‑ 83,000

22.2. expenditure ‑ cost by functionCostofsales 7,990,774 6,133,327 7,597,908 5,732,962Sellinganddistributioncosts 397,293 392,925 397,293 392,925Operatingexpenses 1,156,767 600,904 957,139 486,270 9,544,834 7,127,156 8,952,340 6,612,157

Theabovecostsarestatedaftertakingthefollowingintoaccount:Auditors’remuneration 3,427 2,867 3,420 2,239Auditfee 3,244 2,732 3,237 2,104Expenses 183 129 183 129Otherservices ‑ 6 ‑ 6Depreciation 904,972 1,141,712 831,503 978,987Property,plantandequipment 657,044 910,687 586,233 762,888Amortisationofrestorationcosts:Currentyear 235,474 68,745 232,816 53,819Changeinprioryear 12,454 162,280 12,454 162,280

Leaserentals 10,671 7,049 6,550 5,852Premises 10,671 6,704 6,550 5,852Motorvehicles ‑ 345 ‑ ‑Lossonforeignexchange 29,322 ‑ ‑ ‑(Increase)/Decreaseofstockprovision (6,104) 10,308 (6,104) 10,308Impairmentofaccountsreceivable 12,364 1,051 12,364 1,051Salariesandwages 704,526 649,721 684,986 634,782Pensionandmedicalcosts 100,934 94,963 100,934 90,786




23. Investment income Interestincomeinvestments 1,191,132 868,322 1,248,308 918,063Dividendincomefromassociates 870 870 870 870 1,192,002 869,192 1,249,178 918,933

24. Finance costs Long‑termloans 15,234 20,564 15,226 20,443Bankoverdraftsandacceptances 7,762 4,624 7,762 4,624Notionalinterestonrestorationcosts 245,271 221,049 245,271 215,835

268,267 246,237 268,259 240,902Exchange(gain)/lossonforeignloan(unrealised) (11,452) 51,568 (11,452) 51,568 256,815 297,805 256,807 292,470

25. loss from associates Attributableshareofretainedfortheyearexcludingextraordinaryitems (14,590) (5,515) ‑ ‑Netlossfortheyear (14,590) (5,515) ‑ ‑

26. taxation26.1NormaltaxSouthAfrican‑incometax 357,250 ‑ 357,250 ‑SouthAfrican‑deferredtax 307,060 ‑ 307,060 ‑ 664,310 ‑ 664,310 ‑Foreigndeferredtax (20,726) (48,290) ‑ ‑Foreignincometax 245,967 366,185 ‑ ‑Taxfortheyear 889,551 317,895 64,310 ‑

reconciliation of rate of taxation % % % %

SouthAfricannormaltaxrate 29.0 29.0 29.0 29.0Adjustedfor:Permanentdifferences 3.5 ‑ 3.5 ‑Utilisationofassessedlosses (12.5) ‑ (12.5) ‑Foreigntaxation 6.8 1.6 ‑ ‑Timingdifferences 5.5 ‑ 5.5 ‑Ratechange 0.4 ‑ 0.4 ‑Taxlosses ‑ (29.0) ‑ (29.0)Netreduction 3.7 (27.4) (3.1) 29.0)Effectiverate 32.7 1.6 25.9 ‑estimated tax losses:AvailableforsetoffagainstfutureSouthAfricantaxableincome ‑ 1,160,407 ‑ 1,160,407

notes to tHe annual



ProvisionforSAtaxationismadefortheEuropeanoperationswheretheDutchtaxrateis24.5%,versus29%inSA.ThesignificantincreaseinthetaxchargeisattributabletoachangeinthetaxregimefromOP26tothe10thScheduledispensation.UndertheOP26regime,deductionsforminingcapitalexpenditurewerelimitedtominingincomeanda12%uplift.Underthenew10thSchedule,additionaldeductionsof50%or100%forminingcapitalexpenditureareallowed.TheforeigntaxchargerelatesmainlytotheNigerianoperationsofBrassExplorationUnlimited,wheretheNigeriantaxrateis85%,versus29%inSA.

27. Restoration provision

ThetotalcostoffuturerestorationexpenditureisestimatedatR3772million.Thiscostincludesthenetexpendituretoabandonandrehabilitateboththeonshoreandoffshore

facilitiesaswellasallotherrelatedclosurecosts.

Thecostsareexpectedtobeincurredasfollows:

Financialyear R’million2009: 6482010: 27802011: 3443772


28. Notes to the cash flow statements28.1 Cash receipts from customersTurnoverandotherrevenue 12,536,158 10,462,678 11,859,390 9,666,130Equitylossesofassociates (14,590) (5,515) ‑ ‑Movementintradeandotherreceivables (802,653) (538,416) (655,378) (453,362)Interestreceived (1,192,002) (869,192) (1,249,178) (918,933)

10,526,913 9,049,555 9,954,834 8,293,835

28.2 Cash paid to suppliers and employeesCostofsales (7,990,774) (6,133,327) (7,597,908) (5,732,962)Operatingcosts (1,810,875) (1,291,634) (1,611,239) (1,171,665)Movementininventories (897,868) (132,942) (914,195) (96,478)Movementintradeandotherpayablesandshorttermborrowings 1,329,760 271,523 1,273,514 293,288Non‑cashitems 1,136,430 1,210,179 1,018,766 1,065,803Interestpaid 22,996 25,188 22,988 25,067

(8,210,331) (6,051,013) (7,808,074) (5,616,947)



28.3 reconciliation of cash generated by operations with net profit before taxation

Net profit before taxation 2,719,919 3,032,202 2,650,243 2,761,503Non‑cashitems:Depreciation 657,044 910,687 586,233 762,888Movementinprovisions 546,350 661,037 539,196 634,068Amortisationofrestorationcosts (28,292) (187,992) (40,897) (189,801)Foreignexchange(gain)/loss (27,220) (225,121) (54,314) (192,920)Revaluationofloans (11,452) 51,568 (11,452) 51,568 3,856,349 4,242,381 3,669,009 3,827,306Otheradjustments:Investmentincome (1,192,002) (869,192) (1,249,178) (918,933)Financecosts 22,996 25,188 22,988 25,067

(1,169,006) (844,004) (1,226,190) (893,866)

MovementsinworkingcapitalIncreaseininventories (897,868) (132,942) (914,195) (96,478)Increaseintradeandotherreceivables (802,653) (538,416) (655,378) (453,362)Increaseintradeandotherpayablesandshort‑termborrowings 1,329,760 271,523 1,273,514 293,288

2,316,582 2,998,542 2,146,760 2,676,888

28.4 Taxation paid Charge in income statement (889,551) (317,895) (664,310) -Movement in deferred taxation 283,331 49,489 307,060 -Movement in taxation balance 542,913 314,509 357,250 -(Payments made)/amounts refunded (63,307) 46,103 - -

notes to tHe annual




29. Contingent liabilities 29.1 GuaranteesThegrouphasissuedguaranteesinfavouroffinancialinstitutionsinrespectofhousingloansgrantedbysuchinstitutionstoemployeesofthegroupamountingto: 1,160 1,653 1,160 1,653

Thegroup’sshareof55%ofcostsbeingUSD3.356millionwouldbepayablefromPetroSA’sshareofrevenuesfromanyfutureproductionwithintheE‑Ptract,shouldthetractbesuccessfulthusrepresentingacontingentliability. 27,231 24,413 27,231 24,413

Thegrouphasissuedguaranteesinfavourofafinancialinstitutioninrespectofvehicleloansgrantedbysuchinstitutiontoemployeesofthegroupamountingto: 23,682 45,075 23,682 45,075

ThegrouphasissuedguaranteesfortherehabilitationoflanddisturbedbyminingontheSablefield,amountingto: 180,000 180,000 180,000 180,000

ThegrouphasissuedperformancebondsinfavouroftheEgyptianGeneralPetroleumCorporationinrespectofminimumworkobligationsrequiredforexplorationoperationsinEgypt(USD21million). 170,396 152,775 170,396 152,775

ThegrouphasissuedperformancebondsinfavouroftheRepublicofSudaninrespectofminimumworkobligationsrequiredforexplorationinSudan(USD8million). 64,912 58,200 64,912 58,200




notes to tHe annual


29. Contingent liabilities continuedThegrouphasissuedperformanceguaranteesinfavouroftheRepublicofEquatorialGuineainrespectofminimumworkobligationsrequiredforexplorationinEquatorialGuinea(USD18million). 146,054 130,950 146,054 130,950ThegrouphasissuedamanufactureandexcisablebondinfavouroftheSouthAfricanRevenueServices 5,000 ‑ 5,000 ‑

618,435 593,066 618,435 593,066

29.2 ClaimsPetroSAisintheprocessofnegotiatingasettlementonacontractualdisputewithasupplier. 4,000 ‑ 4,000 ‑

622,435 593,066 622,435 593,066

30. Commitments

30.1 Capital expenditureApprovedbythedirectorsContractedfor 1,722,145 2,325,766 1,722,145 2,068,919Notcontractedfor 3,372,862 253,237 2,333,297 253,237

5,095,007 2,579,003 4,055,442 2,322,156

ThecompanyexpenditurerelatesmainlytotheJabulaniprojectanditisintendedtofinancethisexpenditurefrominternallygeneratedfundsandavailablecashresources.ThegroupcommitmentsincludeR26millionforBEU

foragascompressionunit;R436.6millionforPetroSAEquatorialGuinea(Pty)LtdandR491.4millionforPetroSAEgypt(Pty)LtdforthedrillingofwellsandR86.2millionforPetroSASudanfortheprocessingofseismicdata.




30. Commitments continued30.2 operating lease commitmentsOperatingleasePetroSAPetroSAleasedofficespaceattheV&AWaterfrontfromVictoria&AlfredWaterfrontProperties(Pty)Ltd,effectivefrom1January2003.TheleasepaymentwasfixedatR583605permonth,witha10%escalationperannum.Theperiodoftheleaseagreementwasfiveyearsandendedon31December2007,atwhichtimePetroSAhadtheoptiontorenewtheleaseforafurtherfive‑yearperiodending31December2013.ThisofficespacehadbeensubletfromAugust2006until31December2007.

Withinoneyear ‑ 8,520 ‑ 8,520

30.3 operating lease ‑ PetroSA europe BV PetroSAEuropeBVleasesofficespaceatWillemswerf,13thFloor,Boompjes40,3011XB,effective1December2004.TheleasepaymentisfixedatEur23,360perannum,withaninflationaryescalationperannum.Theperiodoftheleaseisfiveyearsandendson30November2009,atwhichtimePetroSAEuropeBVhastheoptiontorenewtheleaseforafurtherfive‑yearperiodendingin2014.

Withinoneyear 389 374 ‑ ‑Afteroneyearbutnotmorethanfiveyears 259 624 ‑ ‑

648 998 ‑ ‑



notes to tHe annual


30. Commitments continued

30.4 operating lease ‑ PetroSA europe PetroSAEuropeBVleasesmotorvehiclesonbehalfofitsemployees.Thestandardcontractperiodis48months.TheeffectivestartingdatewasOctober2004andendsinNovember2009.

Withinoneyear 335 343 ‑ ‑Afteroneyearbutnotmorethanfiveyears 108 426 ‑ ‑ 443 769 ‑ ‑

PetroSAEuropeBVleasesapartmentsforitsemployees.Therentalisnowonamonth‑to‑monthbasiswithanoticeperiodofonemonth.Theannualrentalwillbeadjustedinlinewithconsumerpriceindex‑allhouseholdseries.

Within one year 101 631 - -

30.5 operating lease ‑ PetroSA equatorial GuineaThecompanyisleasingofficespacein Malaboforatwo‑yearperiod,effectivefrom 1February2008to31January2010. TheleasepaymentsareCFA4000000per month,andwerepaidinadvanceforayear.

Withinoneyear 941 591 ‑ ‑Afteroneyearbutnotmorethanfiveyears 784 ‑ ‑ ‑ 1,725 591 ‑ ‑





30.6 operating lease ‑ PetroSA egyptPetroSAEgyptleasesofficespaceandaccommodationfortwoofitsemployeesinCairo.Theleaseperiodis36monthsforthethreeleaseswithamonthlypaymentofUSD20700intotal.Anescalationof5%atthebeginningofthethirdyearisapplicabletotheofficespace,withthetwoaccommodationleaseshaving5%and10%escalationannually.Thecompanyhasanoptiontorenewtheleases.

Withinoneyear 2,050 880 ‑ ‑Afteroneyearbutnotmorethanfiveyears 2,722 1,809 ‑ ‑ 4,772 2,689 ‑ ‑30.7 operating lease ‑ PetroSA SudanPetroSASudanleasesofficespaceandaccommodationforitsemployeesatNo.45A,Square2,GardenCityDistrict,Mugran.Theleaseperiodis12monthswithamonthlypaymentofEUR8427.50andanescalationof10%forofficespaceand5%foraccommodationforemployeesatthebeginningofthesecondyear.Thecompanyhasanoptiontorenewtheleaseforanotherthree‑yearperiod.

Withinoneyear 2,045 ‑ ‑ ‑Afteroneyearbutnotmorethanfiveyears 4,090 ‑ ‑ ‑ 6,135 ‑ ‑ ‑



notes to tHe annual


31. Prior period errors

Thecomparativefigureshavebeenrestatedforthecorrectionoftheclassificationofproperty,plantandequipmenttointangibleassetsandbuildings.Thisreclassificationerrorhasincreasedthe2007depreciationchargeandconsequentlyreducedtheprofitforthe2007yearbyR880658.Expensesthatrelatedtothepreviousfinancialyearbutwerenotaccruedforwerecorrectedinthecomparativesandhavereducedprofitforthe2007yearfurtherbyR23127490,andincreasedaccountspayablebythesameamount.

ThepriorperioderrorsinthegrouprelatetoPetroSA

EquitorialGuinea(Pty)LtdandPetroSASudan(Pty)Ltd.TheerrorrelatingtoPetroSAEquatorialGuineawasforemployeestaxandprepaymentsinthepreviousfinancialyear.ThisresultedinanincreaseinretainedincomeofR402000andadecreaseinaccountspayableofR380000andinsalariesofR8000withanincreaseinprepaidrentalsofR30000.TheerrorrelatingtoPetroSASudanwasinrespectofprepaidexpensesbeingexpensedintheincorrectperiod.Thecorrectionresultedinadecreaseintheexpensesandnetlossinthe2007yearofR8827088.51withacorrespondingincreaseintradeandotherreceivablesbythesameamount.


30.8 operating lease ‑ PetroSA North AmericaPetroSANorthAmericaleasesofficespace atLyricCentreOfficeBuilding,440Louisiana Street,Houston,HarrisCounty,Texas,77002. Theleaseperiodis36monthswithamonthly paymentofUSD4251.99andanescalationof0.692%

linkedtotheincreaseintaxes,operatingexpensesandutilitycosts.

Withinoneyear 414 ‑ ‑ ‑Afteroneyearbutnotmorethanfiveyears 690 ‑ ‑ ‑ 1,104 ‑ ‑ ‑



32. Directors and executive management emoluments

PetroSAYear ended 31 March 2008

Salary or fee

r’000

Bonuses and performance

payments r’000

Pension contrib.

r’000

Medical contrib.

r’000

expense allowances

r’000

other

r’000

Total

r’000

Executivedirectors: 5,263 1,490 392 145 ‑ 125 7,415SMkhize 3,336 949 200 75 ‑ 70 4,630NGNika 1,927 541 192 70 ‑ 55 2,785

Non‑executivedirectors:

2,204 ‑ ‑ ‑ 864 ‑ 3,068

PSMolefe 381 ‑ ‑ ‑ 288 ‑ 669MWMkhize ‑ ‑ ‑ ‑ 27 ‑ 27BBSiwisa 152 ‑ ‑ ‑ 41 ‑ 193NVukuza‑Linda 231 ‑ ‑ ‑ 80 ‑ 311DRZihlangu 382 ‑ ‑ ‑ 175 ‑ 557JHuntley 53 ‑ ‑ ‑ 19 ‑ 72RJAngel 113 ‑ ‑ ‑ 40 ‑ 153MBDamane ‑ ‑ ‑ ‑ 75 ‑ 75NGumede ‑ ‑ ‑ ‑ 7 ‑ 7MKajee 197 ‑ ‑ ‑ 17 ‑ 214CWNMolope* 145 ‑ ‑ ‑ 41 ‑ 186TChikane 54 ‑ ‑ ‑ 8 ‑ 62BFigaji 210 ‑ ‑ ‑ 11 ‑ 221ANkuhlu 286 ‑ ‑ ‑ 35 ‑ 321

Executivemanagement:

7,533 2,278 526 188 ‑ 211 10,736

WdeMeyer 713 395 71 21 ‑ 24 1,224ESeptember 1,018 59 61 34 ‑ 12 1,184DMarokane 1,138 377 114 34 ‑ 36 1,699NSiswana 1,647 477 99 17 ‑ 50 2,290JMMaisela 1,612 444 97 41 ‑ 50 2,244JEPFalbe 1,405 526 84 41 ‑ 39 2,095

Yearended31March2007

11,518 4,175 786 307 596 337 17,719

Executivedirectors: 4,049 1,621 335 135 ‑ 121 6,261Non‑executivedirectors:

1,546 ‑ ‑ ‑ 596 ‑ 2,142

Executivemanagement:

5,923 2,554 451 172 ‑ 216 9,316

*Thedirectorsfeesofthisdirectorhavebeenpaidtoheremployer.



Cef (Pty) Ltd ‑ holding company Recoveries 188 269 188 269Loansowingto 195,283 255,902 195,283 255,902Cashondeposit 537,648 537,648 537,648 537,648Interestreceived ‑ 66,137 ‑ 66,137Interestpaid 15,226 20,443 15,226 20,443Tradeandotherreceivables 150 ‑ 150 ‑Servicesrendered 205 448 205 448

PASA ‑ fellow subsidiary Royaltiespaid 71,650 63,067 71,650 63,067Tradeandotherpayables 15,587 13,569 15,587 13,569Rentreceivedandotherservices 1,429 1,222 1,429 1,222Tradeandotherreceivables 130 134 130 134

Sff Association ‑ fellow subsidiary Servicesrendered 1,243 144 1,243 144Tradeandotherreceivables 4,123 24,725 4,123 24,725Managementfeesandotherservices 57,054 65,421 57,054 65,421

Subsidiaries and associates Loansowing ‑ ‑ 0.80 0.80Loansreceivable ‑ ‑ 686,563 440,081Goodsandservices 18,901 21,654 18,901 21,654Interestreceived ‑ ‑ 88,209 68,411Servicesrendered ‑ ‑ 12,414 19,890Managementfee ‑ ‑ 12,459 3,480Tradeandotherreceivables ‑ ‑ 54,921 4,580Commissionpaid ‑ ‑ 24,066 23,644Tradeandotherpayables ‑ ‑ 5,671 2,984Recoveriespaid ‑ ‑ 1,026 ‑

oPCSA ‑ fellow subsidiary Tradeandotherpayables 890 1,320 890 1,320Recoveries 7,806 9,875 7,806 9,875

notes to tHe annual

Group Company

2008 2007 2008 2007 r’000 r’000 r’000 r’000

33. Related parties



Industrial Development Corporation of SA Ltd

Servicesrendered ‑ 294 ‑ 294

SABCServicesrendered 12 14 12 14

SArSPaymentsmade 2,824,884 2,224,578 2,824,884 2,224,578

Airports CompanyServicesrendered 133 111 133 111

eskom GroupServicesrendered 177,260 177,221 177,260 177,221Productssold ‑ 58,090 ‑ 58,090

TelkomServicesrendered 19,992 15,677 19,992 15,677

SAAServicesrendered 14,270 24,549 14,270 24,549

* Refer to note 32 for key management remuneration

Group Company

2008 2007 2008 2007 r’000 r’000 r’000 r’000



34. Interest in joint operating agreements

Thegroup’sandcompany’sproportionateshareintheassetsandliabilitiesofunincorporatedjointventures,whichareincludedinthefinancialstatementsareasfollows:

Percentage Holding/Tracts 55% 55% 55% 55% 55% 55%

e‑BA e‑AG e‑AD e‑CB e‑CN e‑DC 2008 r’000Currentassets 36 134 89 53 121 ‑Totalassets 36 134 89 53 121 ‑

Currentliabilities 37 ‑ ‑ 40 24 ‑Retainedincome (2,161) (705) (424) (31,152) (1,483) (43,970)Companycontributiontoventure 2,160 839 513 31,165 1,580 43,970Totalliabilities 36 134 89 53 121 ‑

Revenue 2 12 7 6 8 ‑Expenses 209 17 10 315 707 274Netloss (207) (5) (3) (309) (699) (274)

Partner’s name Pioneer Pioneer Pioneer Pioneer Pioneer Pioneer 45% 45% 45% 45% 45% 45%

Nature of project Exploration Exploration Exploration Exploration Exploration Exploration

Percentage Holding/Tracts 55% 55% 22.86% 22.86% 10% 31.25%

e‑CC e‑Ao Iris Themis Namibia North

Gryphon Marin

2008 r’000Currentassets 801 8 ‑ ‑ ‑ ‑Totalassets 801 8 ‑ ‑ ‑ ‑

Currentliabilities ‑ ‑ ‑ ‑ ‑ ‑Retainedincome (153,050) (280) (26,259) (10,747) (987) (987)Companycontributiontoventure 153,851 288 26,259 10,747 987 59,017Totalliabilities 801 8 ‑ ‑ ‑ 58,030

Revenue 70 1 ‑ ‑ ‑ ‑Expenses 97 36 2 27 5 1Netloss (27) (35) (2) (27) (5) (1)

Partner’s name Pioneer Pioneer

Sterling

Sterling

BHP

Forest

45% 45% 38.57% 20.57% 75% 50% PanAfrica PanAfrica Mitsui TullowOil 25.71% 25.71% 15% 18.75% Afren Afren 12.86% 12.86%

Premier18%


notes to tHe annual



34. Interest in joint operating agreement continued

Percentage Holding/Tracts

55%E‑BA

55%E‑AG

55%E‑AD

55%E‑CB

55%E‑CN

55%E‑DC

2007 r’000Currentassets 17 132 92 125 140 213Totalassets 17 132 92 125 140 213

Currentliabilities 1 4 9 24 123 ‑Retainedincome (1,752) (624) (377) (27,653) (703) (43,696)Companycontributiontoventure

1,768 752 460 27,754 720 43,909

Totalliabilities 17 132 92 125 140 213

Revenue 2 4 12 7 2 12Expenses 24 109 138 453 413 24Netprofit/(loss) (22) (105) (126) (446) (411) (12)

Partners Pioneer45%

Pioneer45%

Pioneer45%

Pioneer45%

Pioneer45%

Pioneer45%


PercentageHolding/Tracts55%E‑CC

55%E‑AO

22.86%Iris

22.86%Themis

31.25%Gryphon

Marin

25%Block402d

2007 r’000

Currentassets 749 5 ‑ ‑ ‑ ‑

Totalassets 749 5 ‑ ‑ ‑ ‑

Currentliabilities‑interestfree 1 ‑ ‑ ‑ ‑ ‑Retainedincome (137,193) (219) (26,257) (10,720) (59,016) (31,950)Companycontributiontoventure 137,941 224 26,257 10,720 59,016 31,950Totalliabilities 749 5 ‑ ‑ ‑ ‑

Revenue 45 ‑ ‑ ‑ ‑ ‑Expenses 999 1 2,974 2,854 24,153 211Netprofit/(loss) (954) (1) (2,974) (2,854) (24,153) (211)

Partners Pioneer Pioneer Sterling Sterling Forest BurlingtonResources

45% 45% 38.57%PanAfrica

25.71%Afren

12.86%

20.57%PanAfrica

25.71%Afren

12.86%Premier

18%

50%TullowOil18.75%

75%





55%E‑P

60%Sable

55%E‑BB

24%Block2A

24%BlockC

55%F‑Q

2007

r’000Productionfacilities 36,011 50,365 14,404 53,812 ‑ ‑Currentassets ‑ 62,594 101 ‑ ‑ ‑Totalassets 36,011 112,959 14,505 53,812 ‑ ‑

Currentliabilities‑interestfree 3 58,345 ‑ ‑ ‑ ‑Retainedincome (31,740) (908,466) (51,588) (162,544) (2,338) (547)Companycontributiontoventure 67,748 963,080 66,093 216,356 2,338 547Totalliabilities 36,011 112,959 14,505 53,812 ‑ ‑

Revenue ‑ 895,875 4 ‑ ‑ ‑Expenses 3 414,882 68 3,424 548 526

Netprofit/(loss) (3) 480,993 (64) (3,424) (548) (526)

Partners Pioneer45%

Pioneer40%

Pioneer45%

Anschutz22.8%Forest53.2%

Anschutz22.8%Forest53.2%

Pioneer45%

Nature of Project Exploration Production Exploration Exploration Exploration Exploration


24%Ibhubezi

55%E‑AA

55%SCG

Capex

60%SableCapex

55%E‑P

25.5%Zambezi

Block

2007r’000Productionfacilities ‑ ‑ 1,377,270 656,198 ‑ ‑Currentassets ‑ 73 301,928 5,578 ‑ ‑TotalAssets ‑ 73 1,679,198 661,776 ‑ ‑

Currentliabilities ‑ 9 310,187 ‑ ‑ ‑RetainedIncome (364) (171) ‑ ‑ (275) (5,719)Companycontributiontoventure 364 235 1,369,011 661,776 275 5,719Totalliabilities ‑ 73 1,679,198 661,776 ‑ ‑

Revenue ‑ 14 ‑ ‑ ‑ ‑Expenses ‑ 185 ‑ ‑ 275 5,719Netprofit/(loss) ‑ (171) ‑ ‑ (275) (5,719)

Partners Anschutz22.8%Forest53.2%

Pioneer45%

Pioneer45%

Pioneer40%

Pioneer45%

Petronas42.5%

ENH15%

Petrobras17%

Nature of Project Exploration Exploration Development Development Exploration Exploration

notes to tHe annual




PercentageHolding/Tracts

10%NamibiaNorth

10%NamibiaSouth

2007r’000

Productionfacilities ‑ ‑Currentassets ‑ ‑Totalassets ‑ ‑

Currentliabilities‑interestfree ‑ ‑Retainedincome (982) (17,503)Companycontributiontoventure 982 17,503Totalliabilities ‑ ‑

Revenue ‑ ‑Expenses 982 17,503Netexpenditure (982) (17,503)

Partners BHP75%

Mitsui15%

Exploration

BHP75%

Mitsui15%

Exploration

Nature of Project

Joint Venture with energy Africa ThecompanyhasbeeninvolvedinproductionintheOribioilfieldsinceMay1997.ThisprojectwasbeingconductedthroughthemechanismofaJointOperatingagreementwithEnergyAfricaBredasdorp(Pty)Ltd,whichhassinceendedon15March2004,asthepartnerhaswithdrawn.Joint venture with Statoil ASA Thecompanyhasenteredintoa50:50jointventure

withStatoilASA,theNorwegianStateOilcompany,todevelopGTL‑FisherTropschtechnologyandtoexploreanddevelopGTLopportunitiesinIranandelsewhere.ThePetroSAshareofassetsamountstoR287.9million(2007:R174million)atyear‑end.Joint venture with Pioneer PetroSAhasaproductionsharingagreementwithPioneerfortheSouthCoastGasfieldproduction.Theholdingis55:45respectively.



bbl barrel(equals159litres)

bbls barrels

bpd barrelperday

Bscf billionstandardcubicfeet

Cef CEF(Proprietary)Limited

Cef Act CentralEnergyFundAct(ActNo38of1977)asamended

MMbbl millionbarrels

MMBoe millionbarrelsofoilequivalent

GTL GastoLiquids

MT metricton

PASA South African Agency for Promotion of Petroleum Exploration and Exploitation(Proprietary)Limited

PetroSA ThePetroleumOilandGasCorporationofSouthAfrica(Proprietary)Limited

PfM Act PublicFinanceManagementAct(ActNo1of1999)asamended

Sff SFFAssociation(AssociationincorporatedunderSection21)

SHeQ SafetyHealthEnvironmentandQuality

NoSA NationalOccupationalSafetyAssociation

NoSCAr NationalOccupationalSafetyCreditedAwardRecognition

ISo InternationalStandardsOrganisation

oPCSA OilPollutionControlSouthAfrica

NIPP NationalIndustrialParticipationProgramme

SorP StandardsOfRecommendedPractice

SCG SouthCoastGas

oHSA OccupationalHealthandSafetyAct

Key Abbreviations


Fields in production and under development

2008 2008 2007 2007

Crude oil/ Condensate

MMbbl

Gas

Bscf

Crude oil/ Condensate

MMbbl

Gas

BscfMovement in net remaining proved and probable reservesAtbeginningofyear 16.0 162.2 23.2 353.7

Revisionsofpreviousestimates ‑ ‑ (1.8) (133.2)

Production (4.6) (52.8) (5.4) (58.3)

Additions ‑ 20.0 ‑ ‑

Atendofyear 11.4 129.4 16.0 162.2

Proved and probable reserve by type of field

Fieldsinproduction 10.9 101.1 14.5 131.0

Fieldsunderdevelopment 0.5 28.3 1.5 31.2

11.4 129.4 16.0 162.2

reserves by category

Proved 7.9 85.1 10.6 117.3

Provedandprobable 11.4 129.4 16.0 162.2

Totalprovedandprobablereservesatendofyear

11.4 129.4 16.0 162.2

Notes

1. oilFieldsinproductionandunderdevelopmentcomprisetheOribi(80%)andOryx(100%)andSable(60%)oilfields.

GasFieldsinproductionandunderdevelopmentcomprisetheF‑AandF‑ASatelliteandE‑MandE‑MSatellitegasfieldsrespectively.Theadditionsin2008relatetotheSouthCoastGasproject.

2. Fieldsunderappraisalcomprisediscoveries.Thereservesshownareeitheralloilorallgas,excludinggasliquids.OilincludescondensateandLPG.

3. Reservesandproductionareshownonworkinginterestbasis(100%).

4. Oilandgasreservescannotbemeasuredexactlysinceestimationofreservesinvolvessubjectivejudgmentandarbitrarydeterminationsandthereforeallestimationsaresubjecttorevision.Thegasandoilreservesreflectedabovehavebeendeterminedbyanindependentsurveyor.

Disclosure of reservesunaudited suPPlementaRy




5.1 Proved reserves oilMeanstheamountofpetroleumwhichgeophysical,geologicalandengineeringdataindicatetobecommerciallyrecoverabletoahighdegreeofcertainty.Forthepurposesofthisdefinition,thereisa90%chancethattheactualquantitywillbemorethantheamountestimatedasprovedanda10%chancethatitwillbeless.GasMeanstheamountofgaswhichgeophysical,geologicalandengineeringdataindicatetobecommerciallyrecoverabletoahighdegreeofcertainty.Forthepurposesofthisdefinition,thereisa90%chancethattheactualquantitywillbemorethantheamountestimatedasprovedanda10%chancethatitwillbeless.

5.2 Proved and probable reserves oilMeansprovedreservesplustheamountofpetroleumwhichgeophysical,geologicalandengineeringdataindicatetobecommerciallyrecoverablebutwithagreaterelementofriskthaninthecaseofproved.Forthepurposesofthisdefinition,thereisa50%chancethattheactualquantitywillbemorethantheamountestimatedasprovedandprobableanda50%chancethatitwillbeless.GasMeansprovedreservesplustheamountofgaswhichgeophysical,geologicalandengineeringdataindicatetobecommerciallyrecoverable,butwithagreaterelementofriskthaninthecaseofproved.Forthepurposesofthisdefinition,thereisa50%chancethattheactualquantitywillbemorethantheamountestimatedasprovedandprobableanda50%chancethatitwillbeless.

5.3 reserves under appraisal oilComprisequantitiesofpetroleum,whichareconsidered,onthebasisofinformationcurrentlyavailableandcurrenteconomicforecasts,tobecommerciallyrecoverablebypresentproducingmethodsfromfieldsthathavebeendiscoveredbutwhichrequirefurtherappraisalpriortocommercialitybeingestablished.GasComprisequantitiesofgas,whichareconsidered,onthebasisofinformationcurrentlyavailableandcurrenteconomicforecasts,tobecommerciallyrecoverablebypresentproducingmethodsfromfieldsthathavebeendiscovered,butwhichrequirefurtherappraisalpriortocommercialitybeingestablished.

5. Definitions

Disclosure of reservesunaudited suPPlementaRy


user Notes


Physical address:ThePetroleumOilandGasCorporationofSouthAfrica(Pty)Ltd151FransConradieDriveParow7500RepublicofSouthAfricaTel:+2721929‑3000fax:+2721929‑3144

Postal address:ThePetroleumOilandGasCorporationofSouthAfrica(Pty)LtdPrivateBagX5Parow7499RepublicofSouthAfrica

Website:www.petrosa.com

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