Buyer of SA’s reserves wants his barrels of oil
THE Department of Energy is in crisis as Taleveras Petroleum Trading, one of the three companies that bought South African strategic oil reserves, has demanded to be given its fuel, which will leave the country poorer by four million barrels of oil.
Taleveras CEO Martial Beauvallon sent a letter to Godfrey Moagi, acting CEO of the Strategic Fuel Fund (SFF), to notify it that the oil trading company would be exporting its barrels. The letter dated April 20 was not the first.
“Kindly note that as per our earlier notification dated 2nd March 2017 we plan to export our barrel from the month of May and therefore this notification should duly be considered as formal notification in line with . . . the storage agreements as well as the tank warrants dated 1 January 2016.
“We believe that the notification provides SFF with advance notice and ample time to implement the above clauses in line with the agreements,” reads the letter.
It was revealed last year that the SFF had sold 10 million barrels of the country’s strategic oil reserves in December 2015 to Glencore, Vitol and Taleveras, headquartered in Abuja, Nigeria.
In total, South Africa consumed 24 billion litres of all fuel grades last year, according to the Department of Energy.
The country’s strategic reserves were sold at a measly $28 a barrel, which at the time was $10 below the market price.
Since plunging to a low of $26.21 a barrel in February last year, oil prices gained 73% to trade at $45 in the late afternoon on Friday.
Professor Jannie Rossouw of the University of Witwatersrand’s School of Economic and Business Sciences said the SFF’s decision was “stupid” and indefensible on the business front and in terms of the country’s oil reserves.
If there was “any kind of interruption to our oil supply we will be without oil”, he said. “You must keep in mind that even though Sasol produces fuel it is not sufficient for our domestic use.”
To buy fuel now would mean paying double for the amount that was sold, which would make no business sense, he said.
Business Times understands that Taleveras bought four million barrels, and Glencore and Vitol three million each.
Stakeholders close to the deal contended there was nothing wrong with the purchase, calling it a rotation and arguing that the country’s strategic reserves would not be affected.
The Central Energy Fund, parent body of the SFF, defended the transaction in a statement, saying it did not need Treasury approval. The country would be well provided for if oil were needed.
“After the December 2015 rotation, the country now has access to 90 days reserves, which is 30 days more than the required volumes. This allows for South Africa to be able to absorb any market variations and provides a buffer for three months in the case of any eventuality.”
During the energy budget speech last year, former minister Tina Joemat-Pettersson said she had issued a directive for the strategic stocks to be rotated, which resulted in increased revenue for SFF.
“This is in place through longterm lease and contractual agreements with the buyers. The estimated revenue to accrue from this process is around R170-million per annum, significantly boosting the balance sheet of the SFF . . . The SFF will continue to ensure that it is able to respond to any shock in the market, whilst optimally making use of the opportunities presented in an evolving oil sector,” she said.
On Tuesday, Energy Minister Mmamaloko Kubayi changed tack, confirming that the country
❛ I hope it was not intentional and colleagues were given wrong info
had sold all but 300 000 barrels of its reserves.
“I hear the issues of the committee being misled. I hope it was not intentional and hope colleagues were given wrong information. The money is in the accounts of the SFF of the sale. That is how the SFF became aware that there was a transaction because they saw money in their account and they started asking what was the money for,” said Kubayi.
She said the SFF was investigating how the stock was sold and whether anyone should be held responsible.
Meanwhile, John Dogo, legal counsel for Taleveras, said that although the company would like to clarify the issues involved he would be unable to do so due to the legal implications of making public statements on commercial agreements.
“With regard to whatever request you may refer to, please note that Taleveras has acted in accordance with the terms of its agreement and in accordance with all titles and warrants jointly executed. Furthermore, Taleveras has met all aspects of its agreement and have continued to pay all entitlements to the SFF, in line with the agreement as at when due,” said Dogo.
At the time of publication, the Department of Energy had not responded to requests for comment.
Joemat-Pettersson was not available for comment.