SA to reduce dependence on Iranian oil
US exemption gives Engen space to seek alternative sources, writes
THE South African and US governments have finally put to rest speculation about whether SA will be penalised for importing Iranian oil. The US this week exempted SA — along with India, South Korea, Turkey, Malaysia, Sri Lanka and Taiwan — from financial sanctions on Iranian oil.
The exemption is an opportunity for SA to reduce its oil imports from Iran. Most importantly, the move gives petroleum company Engen breathing space to continue to use Iranian crude oil while it seeks alternative sources of crude for its Durban refinery. SA and other countries have been under US and European Union (EU) pressure to cut Iranian crude imports as part of sanctions designed to halt Tehran’s suspected pursuit of nuclear weapons.
Responding to questions about what the move means to Engen, company spokeswoman Tania Landsberg says: “Being an integrated oil company which requires reliability along our value chain, we are assessing the impact arising from the tightening of US and EU sanctions against Iran to our business continuity and sustainability.
“Thus, any business decision vis-à-vis the latest development on Iran sanctions shall be made on commercial grounds aimed at minimising any potential business disruption, in our endeavour to ensure supply security and safeguard the best interests of our stakeholders.”
It remains unclear to what extent the Engen refinery — SA’s oldest and second largest — will have to be modernised to accommodate Iranian crude oil.
Energy Minister Dipuo Peters has previously said that the government was concerned about the effect of a switch from Iranian crude on the Engen refinery. Engen’s parent company is Malaysian national oil and gas company Petronas.
Sasol, on the other hand, has started looking for alternative crude oil supplies. “Until a few months ago, Sasol Oil procured a relatively small volume of Iranian crude oil, around 12 000 barrels per day. This represents roughly 20% of Sasol’s crude requirement for processing at its Natref refinery,” spokeswoman Jacqui O’Sullivan says.
Sasol is the majority owner of Natref refinery in Sasolburg.
“In view of … trade restrictions, introduction of both petroleum and non-petroleum sanctions and heightened military presence in the Strait of Hormuz, Sasol Oil sourced alternate suppliers to meet its crude oil requirements, thereby mitigating risks associated with oil supply disruptions from the Middle East.
“Additional Arabian crude oil is being procured by Sasol to make up the required volume. Sasol also continues to purchase crude oil from West Africa,” Ms O’Sullivan says.
She says the change from Iranian crude oil will not necessitate an upgrade to Sasol’s Natref refinery facility.
Commenting on the US exemption, the Department of Energy said yesterday: “This means that the sanctions will not apply to South African financial institutions which transact with the Islamic Republic of Iran for the fiscal year 2012.
“The exception period is six months and is potentially renewable, provided there has been a significant reduction of the crude oil from Iran during the period of the exception.
“It must be noted that this exception only applies to petroleum-based transactions.”
The department said the EU sanctions against Iran, however, remained a hurdle. “Unlike the US, the EU legislation does not make provision for any exceptions. Although the US granted the exception, the EU sanctions will make it impossible for importation of crude oil from Iran due to the ban on the provision of insurance and reinsurance by EU insurers to the State of Iran and Iranian-owned companies. The government continues to engage with the EU in this regard,” it said.