April 10, 2020 [IOL – Published on April 8, 2020] – The Strategic Fuel Fund Association (SFF), which manages the crude oil storage facilities in Saldanha Bay, has no spare capacity to lease out, Strategic Fuel Fund chief operating officer Mfano Nkutha said yesterday.
He was responding to questions from Business Report. The global oil price has hit record lows and there is a massive glut of excess oil on the world market, which might present opportunities for SFF to lease out its storage capacity, or to use the low oil price to boost state-owned oil reserves.
SFF owns three crude oil storage facilities across the country and only one is still operational, the facility in Saldanha Bay. The Saldanha Bay crude oil storage terminal capacity is 45 million barrels, the biggest facility by capacity in the southern hemisphere. It is used to store government-owned reserves of crude oil, and any excess storage capacity is leased out to international crude oil trading entities.
Nkutha said there was no storage capacity available for sale or lease. The state had about 10.3 million barrels of oil in storage.
He said information on third-party- owned crude oil was governed by confidentiality clauses in the contracts that SFF had entered into and therefore could not be disclosed without prior consent of the counter parties to the agreements.
The world oil price slumped to as low as $32 (R605) per barrel after the end of the last global financial crisis in 2008, and the resultant glut of oil on world markets enabled SFF to ramp up revenues from R42m in 2008 to R427m in 2011, by doing oil storage deals with oil traders.
DA spokesperson Kevin Mileham said the low oil price presented a unique opportunity for the SFF to buy additional oil and bolster the oil reserves in these uncertain times. He said the government should consider using the reserves to offset future fuel price shocks on the consumer in South Africa, he said.
Oil prices have halved this year after Russia fell out with Saudi Arabia on reaching agreement on oil production in the Opec oil cartel, and due to the slump in global demand caused by the impact of the Covid-19 virus.
Brent crude was up 83cents, or 2.5 percent at $33.88 a barrel yesterday, after falling more than 3 percent on Monday, on hopes the world’s biggest producers, including Russia and Saudi Arabia, would agree to production cuts at a meeting tomorrow.
Late last year the Central Energy Fund told Parliament that the SFF’s tanks at Milnerton and Island View in Durban, which previously held petroleum and oil products, were being refurbished.
Click on the button and register to get instant access to actionable tank storage industry data