South Africa on average holds crude oil stocks that equate to about 10 days of refinery operation at maximum capacity, but the Central Energy Fund (CEF), which reported to a parliamentary committee yesterday, said the country needed to build up the reserves.
The reserves are held by the Strategic Fuel Fund, a subsidiary of the Central Energy Fund, at a plant at Saldanha Bay, Energy Minister Dipuo Peters reported previously. In a parliamentary reply she said there were 10 million barrels of crude oil “kept by the… fund as strategic stocks”.
Chris Cooper, the Central Energy Fund’s corporate planner, who addressed the select committee on economic development, confirmed after the meeting that the reserves were at Saldanha.
Asked if strategic stocks should be increased, he said: “We would like to.” On whether there was a benchmark for reserves, he said this would be determined by the department.
Pressed on the impact of sanctions by the US and the EU on imports of Iranian oil, he confirmed that oil companies were trying to source “somewhere else”, noting that South Africa enjoyed a six-month exemption from US sanctions. He was concerned, however, that the EU was not likely to insure and reinsure oil cargoes if they were sourced from Iran.
It is a mystery as to which companies are sourcing their crude oil from Iran, as Engen and Sasol, which previously received supplies from Iran, have both emphatically stated that they had stopped these imports.
Meanwhile, Cooper said there was “no such thing as a guarantee” of oil supply because it was a finite resource.
Noting a report by Jeffrey Brown, a US oil expert who devised the export land model, Cooper said that world supply for export had been reduced from 40 million barrels a day in 2005 to about 35 million barrels a day. Thus the amount of oil available for export was going down, and he noted that he would like to see an increase in the oil reserves built up.
“South Africa imports crude. So we are reliant on how much crude oil is available for export on global markets. What is happening is the oil exporters are still increasing the internal consumption but production is remaining constant or even declining. That means there is less available for export.”
Pressed on what was hoped for during the mediation talks being held in Moscow to resolve EU sanctions issues, he said South Africa was hoping that these talks would bring on stream what was decided with US sanctions that an exemption could be put in place to “sort out our oil acquisition”.
Energy director-general Nelisiwe Magubane confirmed that the talks were ongoing.