SOUTH AFRICA POLITICS Crude shenanigans: Was the sale of strategic fuel reserve a fire-pool of a transaction?

The thing about crude oil – according to the experts – is that it doesn’t go off. It nestles there in the earth’s crust, often for 500,000 years or so, before some multinational comes along and drills it out. Crude oil, according to Professor Klaus Möller of UCT’s Department of Chemical Engineering, does not degrade significantly, which is why it is curious that Minister of Energy, Tina Joemat-Pettersson, incredibly, seems to think the national reserve needed to be “rotated” like retreads on an entry-level vehicle.

The sale, or transfer of title, by the Strategic Fuel Fund (SFF) of 10-million barrels of the country’s oil reserves in December at the rock bottom price of $28 dollars a barrel was done with the blessing of Joemat-Pettersson in a “closed tender” process without the Treasury’s knowledge.

This, said Sibusiso Gamede, Chief Executive of the SFF, was because what took place wasn’t actually a sale at all and thus did not need the Treasury’s blessing. The Treasury is keeping quiet for now, bouncing all questions or queries back into the DOE’s court.

Somehow only a few lucky buyers came to learn of the pop-up oil sale of the century. They were the Taleveras Group, a Nigerian-owned oil trading company, Vitol (friends of Thebe Investment Corporation in which the ANC has a controlling 47% stake) and Glencore (who in the same month agreed to sell their Optimum mine to Tegeta Exploration and Recourses, owned by Duduzane Zuma and the Gupta Family).

The sale of the oil reserves has left the country vulnerable with a reported only 300,000 barrels in the pantry, which won’t last an entire day should a crisis befall us. Legally the Strategic Fuel Fund should hold reserves for 20 days in case of an emergency.

If such an emergency did occur and we wanted to buy back the fuel, the good news is we have first dibs on it. The bad news, however, is that we’d have to buy it back at the current price which is hovering around $50 a barrel. Prices are expected to continue rising so those companies that snapped up our reserves stand to make massive profits somewhere along the line.

Central Energy Fund (CEF) director Tseliso Maqubela has said that the CEF (which manages SA’s reserves through the SFF) still had access to 90 days’ worth of oil reserves and that the crude that had been bought in the December sale could not be exported and was still considered part of the country’s strategic reserve stockpile.

The Saldanha Bay storage installation, which is one of the largest in the world, can hold 45-million barrels. Maqubela told Reuters that while the 40-million barrels that were currently in storage were privately owned, the government regarded this as part of its strategic stockpile.

“Should anything go wrong globally, we can access that oil at market prices. We may not own that crude oil but we have access to it at any given time,” said Maqubela.

Okay, so 10-million barrels of our reserves now belong to Taleveras, Vitol, Glencore and we are charging them R170-million a year to park it at Saldanha, a situation Joemat-Pettersson spun as “significantly boosting the balance sheet of the SFF”.

The question now is where did/will South Africa go to replenish our strategic oil reserve and at what cost? Also, will President Zuma’s recent visit to Iran yield oily fruits in the near future?

For now the Democratic Alliance is challenging the Minister of Energy and the CE of the SFF’s interpretation of the transaction as a rotation and not a sale. Shadow Minister of Energy, Peter van Dalen, has approached the Attorney-General and is considering laying criminal charges.

“We were going to take it to the Public Protector but she’s leaving soon,” an exasperated Van Dalen told Daily Maverick. In the meantime the FF Plus has asked the protector to look into the structure of the deal and whether there was any corruption.

December not only brought Nenegate and the oil sale but also news that another scheme backed by Joemat-Pettersson and President Zuma had tanked. Project Irene, in which PetroSA had aimed to buy the retail service station network Engen and an oil refinery owned by Malaysian state-owned company Petronas, backfired when the Malaysians pulled the plug on the deal after PetroSA failed to set aside R5.5-billion for the purchase. The Malaysians were not prepared to wait any longer and the botched deal came, of course, with heavy penalties for South Africa.

Incidentally, the sale of the SFF fuel reserve netted R5-billion which Joemat-Pettersson said was immediately used to buy new stock. She did not specify at what price and from where.

Van Dalen told Daily Maverick on Monday that no mention of the imminent sale of the country’s strategic fuel stocks had been made during a parliamentary portfolio committee on energy meeting in October with the Department of Energy on behalf of the Strategic Fuel Fund (SFF).

“I find that very strange as it is such in important and strategic decision for the country. Why didn’t it come up then?” said Van Dalen.

It is worth reading the The Parliamentary Monitoring Group (PMG) recording of that specific meeting which was described as “confused”. The ministry was represented on that occasion by Deputy Minister of Energy, Thembisile Majola. The DOE’s Deputy Director-General, Tseliso Maqubela, and Muzi Mkhize, Chief Director, Hydrocarbons Policy, at DOE had both offered a “presentation on the strategic fuels stocks position”.

The PMG wrote, “Nobody in DOE knew the whereabouts of the SFF’s CEO, whose office had been found locked, whereabouts of the CEO himself unknown. He was suspected of being on the lookout for a new post, an apologetic member of SFF said. Neither was the chairperson of SFF present or the main elected board, there being only one of six SFF board members at the meeting. The portfolio chairperson, Fikile Majola, confirmed that there had been major misunderstandings with parliamentary invitations but that did not explain the apparent disinterest by the SFF board itself in reporting to Parliament. The presentations were therefore purely by the Ministry and senior officials of the DOE.”

This all just two months before the SFF sold off 10-million barrels which appears to have been a decision that Minister Joemat-Pettersson seems to have made all on her own after “receiving advice” from “experts”.

Van Dalen said that events, particularly the sale of some of the crude to Vitol, needed to be seen in the context of a 20-year-lease recently awarded by Transnet to Burgan Cape Terminals who were developing a fuel storage and distribution facility in Cape Town. Burgan is being partnered by Vitol as well as Thebe Investment Corporation.

“The fuel was sold privately to a company that is partnering with an ANC affiliated corporation. The dots are connecting‚” said Van Dalen.

While that might be the case, the deal is still as murky as an oil slick. DM

Photo: Minister of Energy Tina Joemat-Pettersson delivers her speech during the State of the Nation Address speech debate in the National assembly in Parliament, Cape Town, 16-18 February 2016. (Photo: GCIS)