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SA will definitely lose money from strategic fuel stocks sale - Mahlobo

Nov 22 2017 18:54
Liesl Peyper

Cape Town – Energy Minister David Mahlobo on Wednesday admitted that South Africa will lose money as a result of the sale of its strategic fuel stocks in 2015.

Briefing Parliament’s portfolio committee on energy, Mahlobo said government is currently looking at ways in which to “minimise the losses”, but that the country will lose money – “whichever direction is taken”.

In 2016 it emerged that 10.3 million barrels of South Africa’s strategic fuel stocks had been sold at the end of the previous year, when oil prices were at a historical low.

An investigation into the transaction is expected to be concluded in December this year.

“There has to be a replacement of strategic fuel stock,” Mahlobo told committee members on Wednesday, and admitted that the investigation and process of determining how much stock is needed or is still available has been time-consuming.

“But we have to see how we can reduce the negative impact (of the sale). There is goodwill among the (oil) traders we are dealing with, but remember, we’re negotiating with people who reserve their rights,” Mahlobo said.

Democratic Alliance spokesperson on energy Gordon Mackay asked Mahlobo if government has applied for a secondary interdict in an attempt to hold on to the fuel stocks. “Or are we letting it go?”

Mahlobo said the contract of the sale has not been set aside. “The money is in our account. But the reality is the value of crude is changing all the time. And there is a hedging component (to the transaction).”

He said discussions with traders on how much stock the country can buy back and at what cost are still ongoing.

“I don’t want to prejudice the discussion by giving more detail,” Mahlobo said.

The new energy minister, who was appointed on October 18 on the back of another controversial Cabinet reshuffle, appeared before Parliament on Tuesday and Wednesday to give an update on energy matters, including nuclear energy and restructuring of entities that fall under his portfolio.

Gavin Davis from the DA asked Mahlobo to clarify a media report that appeared in the Sunday Times, suggesting that he visited Russia with the aim of securing a nuclear deal and helping controversial businessmen Gayton McKenzie and Kenny Kunene secure BEE partnership of a R5bn deal with Russian oil and gas company Rosgeo.

Fin24 reported in September that PetroSA had signed a deal with Russian exploration company Rosgeo, which is expected to bring oil and gas development of about $400m (R5.2bn) to South Africa.

The agreement was signed at the BRICS summit in Xiamen, China and involves development in the exploration areas off the South African south coast.

Mahlobo, as on the previous day, said he would not respond to “stories” that are in the media. “It’s just not my style.” 

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david mahlobo  |  energy  |  strategic fuel fund
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