State urged to replenish dwindiling fuel stocks

THE Central Energy Fund (CEF) said yesterday there was no guarantee of oil security for SA and that the government should consider rebuilding the country’s strategic fuel reserves.

This has implications for SA’s balance of payments as the country is under pressure to scale down on buying oil from Iran, currently the cheapest source.

But this may still be a good time to stockpile oil as Brent crude prices have dropped 21% since April 14, when the previous round of international talks with Iran on its nuclear programme was held in Istanbul.

Speaking before the National Council of Provinces select committee on economic development, CEF corporate planner Chris Cooper said oil was a finite supply.

"It cannot be guaranteed," he said. "We are doing our best."

SA had to buy crude oil from what was available and that was a declining pool, said Mr Cooper.

Iran was SA’s largest supplier last year, followed by Saudi Arabia, Angola, Nigeria, Oman, the United Arab Emirates, Antigua and Barbuda, and then various other countries supplying substantially less.

Last week, US Secretary of State Hillary Clinton exempted seven countries, including SA, from sanctions if they cut imports of Iranian oil within the next six months. Under a US law passed in December last year, countries had until the end of June to reduce oil imports from Iran drastically or be cut off from the US financial system.

"International oil supply for exports has fallen from 40-million barrels of oil per day in 2005 to 35-million barrels of oil per day in 2010," Mr Cooper said.

Under such circumstances it was impossible to guarantee security of supply, he said.

"If anyone says they can guarantee security of supply, then they are snake-oil salesmen. "

Mr Cooper said it was up to government, in particular the Department of Energy, to determine how to increase the strategic fuel reserves, located at Saldanha and Milnerton in the Western Cape. The latter site is undergoing refurbishment and does not hold any stock.

"Just how much (oil) and how much they want to spend must still be worked out," he said.

Mr Cooper said a priority for government was to ensure that the European Union allowed for the insurance of Iranian oil cargoes to this country during the 180-day waiver granted by the US.

The US and the European Union have imposed strict sanctions on Iran, which they accuse of developing nuclear weapons — a claim the Iranian government denies.

"It is important that those shipments are insured, but at the same time, SA has to look to other producers to diversify its supply of oil," Mr Cooper said.

He said SA used about 750000 barrels of oil a day and that the increase in demand for petrol and diesel meant that there was a drop in the production of other products such as bitumen for road works that hampered other forms of economic activity.

Earlier this month, Energy Minister Dipuo Peters said SA had a strategic fuel reserve of 10-million barrels, which worked out to be about two weeks’ supply.

In a reply to a Parliamentary question from the Democratic Alliance, Ms Peters said from April last year to March this year, SA had imported 20,4-billion litres of crude oil at a cost of R105bn.

She said each of the country’s four refineries held an average of 10 days’ supply and the Strategic Fuel Fund kept 10-million barrels.

Source: www.businessday.co.za

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