Strategic Fuel Stocks & Storage Facilities: Department of Energy & Strategic Fuel Fund briefing, with Deputy Minister present

Energy

17 August 2015
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The Portfolio Committee on Energy received a briefing from the Department of Energy (DoE) and the Strategic Fuel Fund (SFF) on the strategic fuel stocks policy, and the current situation regarding strategic fuel stocks and storage facilities.

The DoE said the management of liquid fuels within the Department was split into two. Policy matters were centralised under the policy and planning branch of the DoE, which developed policy and strategy under Programme 2. Programme 3 implemented policy once it had been developed and adopted at the Cabinet level.

Strategic stocks were defined as both crude oil and refined products, physical in nature, held by the government and/or oil companies to cater for catastrophes or severe fuel supply disruptions. Products to be kept as strategic stock included diesel, petrol, jet fuel and Liquid Petroleum Gas (LPG). Mandatory strategic stocks would be released only upon declaration of a state of emergency by the Minister of Energy. A study conducted by the DoE in 2006 had indicated that if the country were to have no fuel at all for one day, the country would lose around R1 billion. Some of the challenges faced by the DoE in this regard were the cost of acquiring and holding strategic stocks, developing a funding mechanism for strategic stocks, monitoring and enforcing adherence to set stock levels, and replenishing stock once it had been drawn down.

South Africa was a net importer of crude oil and refined petroleum products. Currently over 50% of the country’s imported crude oil was from Middle Eastern countries. However, the country also received 12% of its crude oil from Angola and 31% from Nigeria. Some of the challenges were that strategic stocks of crude oil were kept only at Saldanha, oil companies had no obligation to keep strategic stocks, and there were no trigger and release mechanisms in place.

The Strategic Fuel Fund (SFF) was responsible for the procurement, maintenance and management of strategic stocks held by the government, while oil companies were responsible for the strategic stocks they held. A funding/financing model for the SFF had not yet been approved by National Treasury. The DoE had proposed a funding mechanism that combined a small portion of a levy and a certain percentage of SFF’s income. SFF was a non-profit Section 21 company and had been managing its own affairs since January 2013, after being managed by the Central Energy Fund (CEF). The SFF received no allocation from government. It had two storage facilities – at Saldanha and Milnerton, both in the Western Cape.

The SFF had an asset base where it accumulated interest on cash reserves, and it also leased storage space to crude oil trading companies. Generated cash flows were used to maintain the infrastructure and to fund all SFF’s operational expenditure. In the 2014/15 financial year it had generated R198 million in revenue, more than double the R93 million that had been generated in the 2013/14 financial year.

The DoE reassured the Committee that there was no crisis in strategic stocks, although there were emerging risks. The country did not have sufficient storage capacity for Liquid Petroleum Gas (LPG). The other issue was that the country was experiencing a lot of unplanned refinery shutdowns. This meant that the country needed a new refinery. The National Development Plan (NDP) stated that by 2017, a decision needed to be taken on refining. The DoE fully believed that this was an informed directive. Given its experience, more storage capacity needed to be built in key cities across the country. There needed to be bulk storage in places like Kimberly and East London, for instance. The state needed to lead this process.

Members asked how many of the six storage tanks at Saldanha were being used. What was the status of the draft policy submitted to Cabinet in 2012? What was the status of Broad-Based Black Economic Empowerment (BBBEE) companies within the sector? How were these companies being promoted? How far was the DoE in monitoring retailers’ compliance with keeping 14-days stocks? What systems were in place to enforce compliance, especially from multinationals? How far was the DoE willing to move in the policy space and give guidance to the SFF regarding its business model? Was the SFF dependent on the income from renting out these tanks? Did the closure of Chevron have anything to do with Burgan terminal being awarded a licence? Was Chevron one of the refineries which were going to be shutdown because it was old? Why was Burgan allowed to build more storage, when the tanks in Milnerton were still empty? What plans did the DoE have in place to open up more storage capacity for LPG? Why was it so bad for the SFF to be under the management of CEF – had the CEF interfered with its business? What was the ratio between black oil companies and white, or multinational companies, who were supplying the country with oil? How much was the country relying on multinationals? What was the current status of SFF storage facilities? What were some of the challenges related to the upgrades of the refineries and the plans to build new ones? 

Meeting report

Opening remarks

The Chairperson said the Committee was supposed to have received a presentation from the Strategic Fuel Fund (SFF) a week ago.

 

Ms Thembisile Majola, Deputy Minister, Department of Energy (DoE) agreed with the Chairperson that the presentation was supposed to have been made to the Committee last week.

DoE Strategic Fuel Stocks Policy,

Mr Tseliso Maqubela, Deputy Director-General, DoE said management of liquid fuels in the country was split into two. There were policy matters which were centralized under the policy and planning branch of the DoE -- this unit developed policy and strategy and was under Programme 2. Programme 3 implemented policy once it had been developed and adopted at Cabinet level. It was important to note that the management of these matters fell under these two different programmes. The delegation present was made up of representatives from these two programmes.

Mr Muzi Mkhize, Chief Director: Hydrocarbons Policy, DoE, said strategic stocks were defined as both crude oil and refined products, physical in nature, and held by government and/or oil companies to cater for catastrophes or severe fuel supply disruptions. Products to be kept as strategic stock included diesel, petrol, jet fuel and Liquid Petroleum Gas (LPG). Mandatory strategic stocks would be released only upon declaration of a state of emergency by the Minister of Energy. Strategic stocks were like an insurance policy. A study conducted by the DoE in 2006 indicated that if the country were to have no fuel at all for one day, the country would lose around R1 billion. Some of the challenges faced by the DoE in this regard were: the cost of acquiring and holding strategic stocks, developing a funding mechanism for strategic stocks, monitoring and enforcing (ensuring adherence to set stock levels), and replenishing stock once drawn down.

South Africa was a net importer of crude oil and refined petroleum products. About 70% of fuel consumption was from imported crude oil and finished petroleum products, and the rest from indigenous resources. Currently over 50% of the country’s imported crude oil was from Middle Eastern countries. The country also received 12% of its crude oil from Angola and 31% from Nigeria. However, some of the challenges in South Africa’s situation were that strategic stocks were kept in crude oil only in Saldanha Bay, oil companies had no obligation to keep strategic stocks, and there were no trigger and release mechanisms in place.

The White Paper on Energy Policy of 1998 required that South Africa keep 90 days of net imports. Based on an analysis of the current situation, it was proposed that the country keep a total of 60 days of strategic stocks, with all stocks to be kept by government. Also, oil companies would be obligated to keep 14 days of refined products as strategic stocks. However, some of the considerations for stockholding in South Africa were the cost of funding strategic stocks, and the lead times for the receipt of imports. On average, it took about 28 days to get the product from the sources of supply and an average of 14 days for demurrage, offloading, refining and transporting to the inland region. Ideally, strategic stock should therefore be kept closer to the markets and closer to operational facilities for the purpose of quality control.

The Strategic Fuel Fund (SFF) was therefore responsible for the procurement, maintenance and management of strategic stocks held by government. Oil companies were responsible for the strategic stocks they held. With regard to the financing of strategic stocks, in the draft policy document, a levy of approximately six cents per litre on petrol, diesel and jet fuel was proposed to finance procurement of stocks, the construction of storage facilities for refined products and operational expenses. The draft strategic stocks policy was tabled by the then Minister in 2012, and presented to the Infrastructure Development cluster in the same year. A working group comprised of the DoE, National Treasury and the SFF was formed to deal with Cabinet’s directive on a funding mechanism. After looking into various options, the DoE had proposed a funding mechanism that combined a small portion of the levy and a certain percentage of the SFF’s income. The DoE would also be in discussion with Transnet on infrastructure matters to reduce barriers to entry, such as the lack of infrastructure.

Mr Maqubela added to the presentation, and said there was no crisis in strategic stocks, although there were emerging risks. He reassured Members, saying that on a day-to-day basis, he personally interacted with all the companies in the industry and there was certainly no crisis. The country did not have sufficient storage capacity for LPG. If the Chevron refinery went down, for example -- as it was currently -- there would be serious problems in supplying the Western Cape with LPG. Therefore there needed to be an alternative for Chevron, which was why the DoE supported the granting of the Burgan terminal licence for the construction of an import terminal. The country could not rely on one facility.

The other issue was that the country was experiencing a lot of unplanned refinery shutdowns. This meant that the country needed a new refinery. The National Development Plan (NDP) stated that by 2017 a decision needed to be taken on refining. The DoE fully believed that this was an informed directive. Given the experiences the country had had, more storage capacity needed to be built in key cities across the country. There needed to be bulk storage in places like Kimberley and East London. The state needed to lead this process.

He also informed the Committee that the country had not been experiencing very good supply in the last two weeks, particularly in Gauteng. This could be traced back to the country’s refining capacity. When one of the refineries at the coast had a problem, the country ran into challenges. However, not all the oil companies were affected. One of the proposals which would be made to the policy branch was that the strategic stocks policy needed to ensure that oil companies kept enough buffer stock at their own cost.

He said the DoE was holding daily logistics planning meetings with oil companies to make sure that things would continue to be working well until the Chevron refinery was back in operation fully. Currently the refinery was operating at 30%.

The Chairperson agreed that the shortage of gas in the Western Cape had been a concern, even in Gauteng. In the absence of a crisis, the issue of strategic stocks was not of public concern, but the issue of supply on a daily basis was a real issue, and it needed serious discussion.

Strategic Fuel Fund (SFF) on Strategic Fuel Stocks and Storage Facilities

Mr Mfano Nkutha, Chief Operations Officer, SFF, provided a history of the SFF -- how it was funded and how it had operated. It had always been a non-profit Section 21 company. Up until 1984 it had been managed by Sasol, from 2002 SFF it had been managed by PetroSA, from 2010 it had been managed by the Central Energy Fund (CEF), and since 2 January 2013 it had managed its own affairs.

The SFF had two storage facilities at Saldanha and Milnerton, both in the Western Cape. Saldanha currently had six underground tanks holding 7.5 million barrels each. The facility had 40 years of useful lifespan remaining. Milnerton had 39 smaller tanks, holding 200 000 barrels above ground. The facility was currently undergoing integrity testing to determine its lifespan. There were no strategic stocks at the facilities.

The SFF had an asset base where it accumulated interest on cash reserves, and it also leased storage space to crude oil trading companies. Generated cash flows were used to maintain the infrastructure and to fund all SFF’s operational expenditure. In 2014, it had generated R197 million from leasing its tanks for crude oil. Excess funds were transferred into cash reserves. The SFF received no allocation from government.

Mr Sivuyile Ngqongwa, Acting General Manager: Corporate Services, SFF, gave an overview of the SFF’s financial status. In real terms, the R 2.6 billion revenue generated by the SFF in 1995 was more than ten times higher than the R198 million revenue generated in 2015. The explanation lay in the withdrawal of policy instruments that had been at the disposal of the SFF at the time. For example, South Africa had been an importer of refined production for the country, so on the withdrawal of these policy instruments, the SFF had had to do an introspection of what it had to its disposal. What it had was crude oil storage tanks which belonged to the state, and the spare tanks could be leased out to oil traders. However, this accidental business model had its own challenges. For example, it was subject to the whims of crude oil price fluctuations and it was biased to a market which was unstable. The 2008 depression in oil prices had been good for the SFF as it had enabled the company to enter into contracts with oil traders. This had lifted the company’s revenue from around R42 million to R427 million in 2011.

Revenue generated in the full financial year of 2014/15 was 200% more than that generated in the 2013/14 financial year. In managing an operation that had a business model vulnerable to market swings, the SFF required a steadfast cost containment regime. SFF’s operating costs between 2013 and 2015 had therefore been below budget. In the 2014/15 financial year, SFF’s revenue had been around R199 million -- a significant increase from the R93 million in 2013/14.

Mr Nkutha referred to strategic stock policy issues, and said the DoE was the accounting authority and the SFF was the implementing agency. An SFF-DoE task team had been established and had produced three documents to support the work of the SFF:

* A funding proposal to National Treasury (2014);

* A tax treatment of strategic stocks to National Treasury (2014);

* Potential storage locations for petroleum products (2015).

Some of the locations under consideration were Island View (Durban), Richards Bay port, East London, Cape Town port and Jameson-Park precinct. However, some of the matters outstanding were the finalisation of stock level requirements, concurrence from National Treasury for levies to be implemented, and feasibility studies for the short-listed storage sites.

Deputy Minister Majola said it was most unfortunate and unacceptable that Members had been subjected to a power point presentation which they had not been able to study beforehand. A base document should have been provided to the Committee. She said there was a lot of synergy between the two presentations, and hopefully the irritation would not make Members digress from the strategic issues to be discussed.

Discussion

The Chairperson Majola asked about the board and management of SFF. How many of the six tanks at Saldanah were being used?

Mr Nkutha said there were six tanks in total. Two were used for strategic stocks and four were used for commercial customers. None was empty.

Dr Chris Cooper, Advisor, Central Energy Fund (CEF) said that Milnerton was empty, with the exception of three tanks which were being used for commercial use, primarily going to the Chevron refinery. These were the small tanks. The six tanks at Saldanha were the large tanks -- two were holding strategic crude oil for the country, and four were being rented out on a commercial basis.

Ms T Mahambehlala (ANC) asked about the draft policy which had been submitted to the Cabinet by the DoE in 2012. What was the status of the policy? According to the presentation, a Ministerial submission had been drafted requesting approval of the proposed funding mechanism and also seeking concurrence by the Minister of Finance. What was the outcome of this submission? The DoE had mentioned that it needed to promote Broad Based Black Economic Empowerment (BBBEE) -- what was the status of BBBEE owned companies within the sector currently? She agreed with the NDP’s sentiments that by 2017 decisions on a new refinery needed to be taken. How far had Project Mthombo, the government’s planned oil refinery in the Eastern Cape, progressed in this regard? Had fundamental problems between the Burgan terminal and Chevron been resolved? Was Burgan operational now? Which were the refineries which were shutting down?

Ms Makhubela-Mashele (ANC) said according to the policy, retailers must be able to have in storage 14 days of fuel supply to curb the challenge of fuel shortages which came about as a result of unplanned shutdowns across the country. How far was the DoE in monitoring retailers’ compliance with this? The shutdown of refineries should not affect the availability of fuel supply. It seemed like the DoE was falling short in enforcing its own policies. What systems were in place to enforce compliance, especially from multinationals? She said that the draft policy proposed a 6% levy -- how far had this been implemented? Why were some aspects of the policy being implemented, and others not?

She said the SFF operating model was not that of a business, and questioned whether this did not limit the growth of the business, especially in regard to bank guarantees and expansions. The model needed to be looked at again, and the DoE needed to assess what it wanted to achieve with SFF. How far was the DoE willing to move in the policy space and give guidance to the SFF regarding its business model?

Mr P van Dalen (DA) said the SFF’s main objective was to maintain the country’s strategic stocks. The Ministerial directive indicated that the country needed to have ten million barrels of oil per day in reserve and a 40-day reserve. Where was the money for this going to come from? If this was what government wanted, they needed to provide the money for the SFF to do it. With more than R2 billion in investments, why was SFF looking more like an investment company than an entity which bought oil stocks? With the oil price as low as it was now, it was a better investment to buy crude oil and store it until the price went up. Saldanha had a capacity of 45 million barrels of crude oil stock, but the current stocks were very low.

With regard to storage, he said it was confusing that the DoE was asking for more storage space but at the same time, the SFF was renting out tanks which they were not using to oil companies. This made no sense. Was the SFF dependant on the income from renting out these tanks? All tanks should be reserved for strategic stocks and they should be used just for that. They should not be empty, they should always be full. Before 1994, the country had kept huge stocks of oil because of sanctions. South Africa had been reliant on its own devices to keep crude oil, and after 1995 there was a huge sell-off of crude oil from the mines.

He asked about the Morgan Stanley case -- how far was the DoE in dealing with this, and how did it affect the day-to-day running of the Department? The Auditor General’s report had indicated that “management had not exercised adequate oversight responsibility regarding compliance and related internal controls” -- how was the DoE addressing this issue? Did the closure of Chevron have anything to do with the Burgan terminal being awarded the licence? Was Chevron one of the refineries which were going to be shutdown because it was old? Why was Burgan allowed to build more storage when the tanks in Milnerton were still empty? On LPG, he said people were hijacking gas trucks to get gas -- what plans did the DoE have in place to open up more storage capacity for LPG?

Why was it so bad for the SFF to be under the management of the CEF -- did the CEF interfere with the business of the SFF? In 2010, he had been one of the Members who had gone on a study tour to Venezuela, and the government there had shown an interest in using Saldanha as a halfway house for its storage of oil. How far had these negotiations gone?

Mr M Dlamini (EFF) said according to the DoE presentation, the study conducted in 2006 had indicated that the country would lose R1 billion if the country ran out of fuel completely for one day. What were the estimates now? What was the ratio between black oil companies and white or multinationals who were supplying the country with oil? How much was the country relying on multinationals? The DoE required the country to keep 60 days of stock -- what was the current status? What plans were in place to get more new players in the industry? There was a general perception that the Transnet National Ports Authority (TNPA) owned the bulk of the infrastructure and was running on 99-year leases. Was this the case, and how would it be addressed to allow more black players into the industry? In which areas was the DoE looking to build more storage facilities? How many black suppliers of fuel were there?

Mr J Esterhuizen (IFP) asked whether the SFF had acquired any stake in the Burgan storage facility. How would this new facility impact trade and the economy as a whole? In the presentation, the DoE had indicated that Chevron had closed down, but the media had recently reported that Chevron was busy spending about R400 million on upgrades. Was the DoE aware of this? What stake did the SFF have in the Durban storage facility? The country needed to focus more on exports and less on imports, as everything the country imported made the value of the rand lower.

Ms Makhubela-Mashele asked the Deputy Minister whether the country should not be looking at commissioning another study on its strategic stock policy. The last study had been in 2006 and the economy had grown since then. The Commission had given a recommendation that there be 60 days of stock, looking to the Organisation for Economic Cooperation and Development (OECD) countries for direction and guidelines.

Mr M Matlala (ANC) said the late submission of documents by the SFF was unacceptable and if this were to happen again, the entity would be turned back. What was the current status of SFF’s storage facilities? What were some of the challenges related to the upgrades of the refineries and the plans to build new ones?

Mr R Mavunda (ANC) asked about the delay in the decision by National Treasury regarding a funding mechanism for the SFF. The DoE had stated that the delay was partly due to staff changes. What were these changes? Why had there been no formal response received from National Treasury to date? Had any follow-up been made by the DoE? Did it have a maintenance plan for the existing refineries? The DoE should avoid a situation like that of Eskom, where the lack of maintenance had resulted in serious instances of load shedding.

The Chairperson agreed that there was a need for the DoE to commission another study. The crude oil landscape was changing as a result of the shift from a reliance on Middle Eastern countries for crude oil, to including more African countries such as Nigeria and Angola. A study needed to be commissioned to take into account Africa’s development capacity, and South Africa needed to draft a strategic fuel stock policy with these new dynamics in mind. What was the progress on the construction of the Burgan terminal?

Deputy Minister Majola suggested that the first questions to be addressed should be those relating to policy, because a lot of the questions had arisen from this. Related to that would be the issue of SFF’s business model and the changing management of the SFF.

The Chairperson said at some point there needed to be a conversation around the entire value chain and not just strategic stock. There needed to be discussion on the relationship between strategic stocks and commercial stock, the role of the private sector, and issues around the security of supply.

Mr Maqubela thanked the Deputy Minister for the direction given. He agreed that there was a need for the DoE to take advantage of the fact that the policy framework had not yet been finalised. Things had changed in the global space, and things were changing within the Southern African Development Community (SADC) region. These changes needed to be included in the policy framework. African countries currently accounted for more than 50% of South Africa’s crude oil supply, with the bulk coming from Nigeria and Angola. Huge storage facilities were being built in Mozambique. Botswana had been building huge storage tanks since 2010 as well, and South Africa needed to take advantage of these developments. Many private sector companies were also investing in storage facilities, such as the Burgan terminal. Other private sector investments were in Coega and in Richards Bay. These had changed the scenario for the strategic stock framework.

When the current policy had been developed, there had been no multi-product pipeline, and much had changed since then. He agreed with the Chairperson that there needed to be a wider discussion around the entire value chain to include Historically Disadvantaged South Africans (HDSAs) who operated in this space. There were a lot of HDSA companies in the space, but most of them were still very much unknown and they needed to be brought to the front. Policy therefore needed to look into a more integrated approach. The DoE had not responded to integration as it should. Separating the SFF from the CEF had been a well thought decision. The DoE had looked at models globally, and having a separate strategic petroleum reserve company was the way other countries had gone. Those which had not gone that way were those which had very strong national oil companies. Therefore the decision taken by the Minister that there needed to be legislation prepared to establish a petroleum reserve company, had been a good one. The SFF had gone to look at the models to see what worked in other countries, and the DoE had also done extensive studies. There needed to be a seamless release of stocks when the situation arose.

He said that no refinery had been closed, and those which were currently not operating were on maintenance shutdowns. Chevron had not been closed -- they were on a planned maintenance shutdown. Every year the DoE received a schedule of planned shutdowns from the oil companies, because shutdowns were required by law. The DoE’s role was to ensure that there were no overlapping shutdowns. The problem arose when the refineries did not stick to their schedules because of unforeseen circumstances, primarily those relating to the ageing infrastructure. Another problem which the country needed to explore was that the availability and reliability of rotating maintenance crews. This was a matter which needed to be looked into, to assess whether these maintenance crews were not letting the country down.

He said Chevron was currently operating at 30% capacity. Shell and BP had also been experiencing some difficulties. Engen was on a planned maintenance shutdown, but it had come back on line last week, while Sasol Secunda was on a planned maintenance shutdown. PetroSA was operating at 50% capacity. On the building of a new refinery, he said the NDP indicated that a decision needed to have been taken by 2017, but the DoE was not waiting until 2017 to make a decision. The building of the Mthombo refinery, which had been stopped, was now being reconfigured but there were some challenges in this regard.

With regard to the delays from National Treasury, he said the DoE had been restructured in December 2013 and the Department had decided to centralise policy development. In 2014, however, electricity had become the main priority and all focus had been on trying to resolve the country’s electricity and Eskom challenges.

He agreed that currently there was a heavy reliance on multinationals within the liquid fuels space. However, HDSAs were significant and they were being brought into the sector as well. He gave an example of a black-owned oil company which last year had a turnover of over R1 billion and said there were many such examples, and they needed to be supported. He thanked Transnet and Eskom for the support they were already providing to these companies in driving empowerment. Another success story was that of one black women-owned company, which was the only company listed to lift crude oil from Iran.

Mr Mkhize also agreed with the Chairperson’s suggestion that the entire value chain be looked at, because strategic stock was a sub-section of the energy security space. With regard to the status of the policy, he said proposals were there, seeking to improve the policy from looking at crude oil only, to including other products and changing the current timeframes. The policy in place remained in place, and the 14-day Ministerial directive was also in place. Oil companies, however, were currently not obligated to hold 14 days of stock because the proposed policy was not in place. The DoE would have to go back and engage on the policy. After the draft had been issued for public comment, there had been some engagements but the full process had not been completed. There was a need to resolve the operating model for the SFF, and to look at its funding model. Other jurisdictions also needed to be engaged so that the DoE could learn from them how they dealt with strategic stock holdings. Because the 14-day requirement was not yet in place, there had been no monitoring and enforcement from the DoE.

He said the BBBEE aspect needed to be incorporated in the process of erecting infrastructure and in the promotion of HDSAs in import and export controls. This aspect needed to be strengthened. The Burgan licence project had been approved, but it was not yet operational. The DoE did not require retailers, but rather wholesalers who would be the ones to keep the stock. Most of the oil companies had a refining arm as well as a wholesaling arm. The 6 cents levy was part of the proposal, but the figure could change under review and the DoE could implement a more suitable figure. With regard to the Not-For-Profit organisation (NPO) status of the SFF, he said the DoE was looking at the legal framework which would govern the entity. However, the DoE would need to start at the strategic viewpoint, looking at the mandate and strategic objectives of the SFF. The DoE still needed to go back to the drawing board.

On the closure of the refineries, he said the DoE was not saying that there would be refineries which would close. However, refineries were frequently on unplanned shutdowns and some would not come back on the planned dates. This caused overlaps. The companies themselves had their own maintenance plans and the DoE engaged with them. No refinery had been built without some form of assistance from government. The state had a role to play in building refining capacity. There were also issues of competition between the refineries which needed to be looked into, especially during planned shutdowns.

He said the DoE had noted as a challenge that new players were struggling to gain access the industry, and the DoE had tried to address this in the Petroleum Pipelines Act. This was not working as envisaged, however. The leases were not 99-year contracts, as the country had moved away from these long-term leases. The DoE had been engaging with Transnet and the National Energy Regulator of South Africa (Nersa) in this regard, to deal with issues of co-jurisdiction.

On storage, he said new sites to build new facilities had been identified, and they would be closer to the markets. Focusing on exports and not imports was a challenge, because the country did not have crude oil and it needed to import crude oil.

Mr Nkutha said the current status of facilities was that Saldanha was fully operational. Milnerton was undergoing integrated testing, after which there would be some refurbishments. With regard to why the SFF needed storage when they had tanks to lease out, he said the facilities were designed for crude oil, and the strategic stocks policy required the SFF to keep clean products such as diesel, petrol and jet fuel. These products could not be stored in the facilities which the SFF currently owned in Saldanha. Also for safety reasons, no clean products could be introduced to Milnerton.

On the Venezuelan question, he said the crude which Venezuela was interested in storing at Saldanha was a low density crude oil which did not fit the crude oil specifications which Saldanha could accept. While the SFF needed oil companies to store its products, the fuel needed to be according to the specifications of the pumps the SFF was able to process.

Ogies was no longer operational, and because of the mining activity no crude oil could be stored there. There was a lot of blasting in the area.

The SFF was not an equity investor in the Burgan terminal. It was interested in the terminal because the strategic stocks policy called upon it to involve BBBEE in these facilities. Therefore once the storage facility was operational, the SFF needed to create an opportunity for blacks to participate. Also, anybody who was building storage facilities created an advantage for strategic stocks infrastructure, because they would be building port infrastructure.

Ms Mahambehlala asked why the SFF’s Chief Executive Officer and Chairperson were not part of meeting. Also, why was there such a low representation of women within the SFF -- out of an executive of six, there was only one female. This was unacceptable.

Mr Nkutha said there had been a communication problem regarding the meeting. He had spoken to the Chairperson earlier that morning, and she had not received an invitation. He had not seen the CEO for a week -- his office had been locked and he had not been in the office since Tuesday 4 August. He could not provide any more information other than that.

With regard to women’s representation, he said that whenever the SFF had a vacant position the company always advertised in all the major publications but there had been very few women who had come in for interviews. The SFF was addressing this by introducing a “Women and Oil” programme, which identified capable women who could lead the SFF from within the company.

Deputy Minister Majola said some of the challenges were because of the internal misalignments within the DoE. The policy was concentrated under one branch and it was therefore not humanly possible to manage all the work. This was something which was impeding the progress of the DoE regarding policy. There was also a misalignment between those who developed policy and those who implemented policy on a day-to-day basis. The DoE needed to take responsibility for some of these actions.

She agreed with the Chairperson that the entire energy space needed to be looked at, especially changes around oil policy and what was happening globally and what the new discoveries of gas meant for the country. LPG was a critical aspect around heating and lighting, and people were struggling due to a lack of modern alternatives to electricity.

The industry was a very male-dominated, and the efforts of the sector in transforming the industry were not what they should be. In the month of August, the DoE was running workshops to look at opportunities for women within the energy space, and all entities had taken part. However, the SFF had not taken part in these workshops yet.

With regard to the independence of the SFF, she said all the major oil companies discussed today had started as national oil companies, and it was with the support of government that they had been able to grow. The country therefore needed to look at where it wanted to go, especially because of the possibility of gas discoveries in the Karoo. The matter of Burgan versus Chevron was a very clear national interest issue -- the country could not continue to protect certain entities at its own expense. It was not in the national interest to hoard infrastructure.

She said load shedding would look like a walk in the park if the country were to run out of liquid fuels.

The Chairperson asked why the CEO’s office had been locked for a whole week.

Deputy Minister Majola said it was a very unfortunate situation. The Chairperson had not been informed about the meeting. There were challenges surrounding the CEO, because he was looking to leave the SFF. However, the Chairperson would be in a better position to inform the Committee about those developments.

Chairperson thanked the Deputy Minister, Members and the representatives of the DoE and SFF for their engagement.

The meeting was adjourned. 

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