South Africa is running out of strategic oil reserves

South Africa has only 6.9 million barrels of oil left in its strategic fuel fund – enough for about 30 days of refining at 200,000 barrels per day.

Mineral and Petroleum Resources Minister Gwede Mantashe revealed this in response to a Parliamentary question from National Assembly member Mikateko Mahlaule.

The MP asked the Minister whether South Africa has an adequate petroleum supply, considering the level of strategic stock held by the Strategic Fuel Fund.

Mahlaule also asked for more information on the volume of strategic stock available and how many days of national consumption that represents.

Mantashe explained that South Africa’s petroleum sector was resilient amid the instability caused by the war in Iran, but added that its refining capacity has declined significantly, making it vulnerable to geopolitical events.

In his response, the Minister clarified that the stock held by the Strategic Fuel Fund is 6.9 million barrels, which, given the current 200,000 barrels-per-day crude processing capacity, equates to about 30 days of crude oil cover.

According to Mantashe, the decline in refining capacity is concerning, although he added that Sasol’s coal-to-liquid facility in Secunda is a stabilising factor.

The Minister noted that South Africa has an abundance of coal resources, which means the Secunda facility complements imported and locally refined fuel.

However, South Africa’s low strategic oil reserves remain a concern, prompting the Department of Mineral and Petroleum Resources to publish a draft Strategic Stocks Policy.

“The policy seeks to improve the strategic stocks position by keeping both crude oil and refined products,” Mantashe explained.

The department’s policy also proposes that oil companies maintain a certain level of strategic stock to buffer South Africa against global shocks.

Nearly 100% of reserves wiped out

Established in 1964, the state-controlled Strategic Fuel Fund has been a cornerstone of South Africa’s fuel reserve management and energy policy, procuring and storing emergency crude oil reserves.

It was created in response to Apartheid-era international oil sanctions and Middle Eastern supply risks.

In order to store these reserves, the country repurposed disused coal mines, such as those near Ogies, into underground Brent crude storage facilities.

Large concrete underground storage facilities were later built, most notably at the Saldanha Bay Terminal, and by the 1970s crude oil stock reached a peak of 158.5 million barrels, enough to supply South Africa for a year.

However, since then, South Africa’s strategic oil reserves and refining capacity have dwindled, coupled with the illegal and secretive sale of the country’s strategic crude oil reserves.

From December 2015 to January 2016,  10 million barrels of strategic oil reserves were sold at a large discount, without public tenders, board approval from the Central Energy Fund (CEF) or Strategic Fuel Fund (SFF).

The Western Cape High Court overturned the oil sales in November 2020 and declared them corrupt, unlawful, and invalid.

It found that the deals compromised South Africa’s national emergency self-reliance and left taxpayers facing hundreds of millions of dollars in restitution or buy-back costs.

Several individuals were implicated in the illegal sale, including SFF Acting CEO Sibusiso Gamede, who received suspicious payments, and former Energy Minister Tina Joemat-Pettersson.

Today, the country’s strategic oil reserve of 6.9 million barrels is 96% lower than its peak in the seventies.