South Africa plans to engage with traders who acquired strategic oil reserves two years ago, even as it prepares legal action to try to cancel the deal.
The Strategic Fuel Fund (SFF), responsible for managing the reserves, sold ten-million barrels of oil in December 2015 to Taleveras Group and joint ventures of Vitol Group and Glencore. A probe of the $280-million sale, conducted when prices languished near an eight-year low, has persuaded the South African government to take action, Energy Minister Mmamoloko Kubayi said last week.
The Central Energy Fund (CEF), which oversees the unit managing the strategic reserves “is going to court to try [to] nullify the contracts”, the Minister told reporters last week in Durban. “They’re also engaging with the traders because they don’t want to tarnish those relationships.”
Glencore and Vitol declined to comment.
The CEF’s SFF previously described the transaction as a rotation of stocks, a perspective Taleveras agrees with.
“This is purely a rotational transaction, as there is an underlying buy-back obligation for crude and products, so the issue of branding this as an outright sale is unacceptable,” John Dogo, of Taleveras’s legal department, said in an emailed reply to questions. “The goods in Saldanha Tanks have been paid for and the proceeds of the sale are with the SFF, inclusive of storage fees invoiced monthly by the SFF to date.”
The proceeds from the oil sale should have been used by the SFF to buy fresh supplies to update and maintain the quality of its reserve, rotating old stock bought over 20 years ago, Taleveras said.
Kubayi, who was named Energy Minister at the end of March, said a month later that she had found “glaring governance problems” related to the crude sale. The CEF also failed to inform the National Treasury of the sale, which was a requirement, according to a report last year by South Africa’s auditor-general.