The reconstruction and development plan could receive a huge cash injection if surplus oil reserves are sold, reports Teigue Payne
SOUTH AFRICA has an inheritance of surplus oil which could yield R2-billion to R4-billion if sold — a massive possible injection to finance the reconstruction and development programme (RDP), the ANC’s all- embracing plan to right the wrongs of apartheid. The big debate seems to be how many months of reserves of oil this country needs.
In late December last year, the then minister of Mineral and Energy Affairs, George Bartlett, came clean about what had hitherto been South Africa’s secret oil reserves. He revealed that 77-million barrels of reserves were being stored at Cape Town, Saldanha and Ogies, some of it in mine shafts. He said this was equivalent to about eight and a half months of current imported crude oil requirements.
It’s understood that at its peak in about 1989, reserves were a massive 150-million barrels. What happened to the proceeds from the sale which reduced those stocks to 77-million barrels by 1993 is yet to be revealed.
In July this year the director general of Mineral and Energy Affairs, Piet Hugo, told a parliamentary standing committee that South Africa had seven to eight months of oil in the strategic reserve, worth about R5- billion. He said his department had proposed that South Africa maintain reserves of at least six months of national requirements, but that sale of two or three months’ supply could net R2-billion.
By implication, his statement means little net oil has been sold since Bartlett’s statement. A statement on the subject by the present minister, Pik Botha, is expected soon.
But according to the authoritative Paris-based International Energy Agency, a normal country needs about three months of stocks. Mike Haworth, an analyst at stockbrokers Silvis Barnard Jacobs Mellet and an expert on South Africa’s oil industry, says no more than three months is needed because oil is internationally traded and freely available to this country.
If the new government insists on the lower level of reserves rather than the department’s recommendation, a total of about R4-billion could be earned from the sale.
Haworth says while part of the surplus stock was sold following political liberalisation, there have not been net sales more recently because the ANC told the old government not to.
Haworth says the oil deteriorates slightly under storage. It could therefore fetch slightly less than the current price of around USD18 per barrel.
* Teigue Payne is research director of BusinessMap SA