SA has just 13 days of fuel reserves as Gulf oil supply risks rise: Anthea Jeffery

Brent crude has climbed back above $100 a barrel after Saudi Arabia shut its East-West pipeline following a drone strike, and Houthi forces seized territory near the Bab al-Mandeb Strait, threatening another Gulf oil corridor. South Africa holds just 8 million barrels in reserve at Saldanha Bay, enough for roughly 13 days. A draft policy aims to lift this to 60 to 90 days' supply, managed by the newly formed South African National Petroleum Company. But the body succeeding the Strategic Fuel Fund, found by courts to have corruptly sold off reserves in 2015/16, and a policy riddled with drafting errors raise real doubts about execution..By Anthea Jeffery*.Two key events in the past week put Gulf oil supplies at increased risk and helped push the price of Brent crude back above $100 a barrel. The first was Saudi Arabia’s decision to shut down its East-West crude pipeline following a drone strike. The second was a sudden advance by Iran-aligned Houthi forces in Yemen, who swept south along the Red Sea coast, seizing towns and taking control of strategic islands inside the Bab al-Mandeb Strait. This gives the Houthis the capacity to close a key artery for Gulf oil, even as passage through the Strait of Hormuz remains constrained.Such events make it vital for oil-importing countries to have adequate strategic reserves on hand to cope with possible shortages. Yet South Africa has allowed its strategic reserves to dwindle to some 8 million barrels of crude oil, held in storage at a state-owned terminal in Saldanha Bay with an overall capacity of 45 million barrels. Since the country needs some 600,000 barrels a day, the current reserve is enough for 13 days (or roughly 18 days if Sasol’s coal-based output of 150,000 barrels a day is also taken into account.) To help build up reserves to between 60 days’ and 90 days’ supply, the Department of Mineral and Petroleum Resources (the Department) has devised a draft Strategic Petroleum Stocks Policy (“the Policy”), which was gazetted for public comment on 9 July 2026.The building of up adequate reserves was recommended back in 2006 by the Moerane Investigation Panel into Fuel Supply Shortages. That planning for this reserve is finally in progress 20 years later is a small step forward. However, implementation is to be managed by the state-owned South African National Petroleum Company (SANPC), which was established in 2025 through the merger of the Strategic Fuel Fund, PetroSA and iGas. Can the SANPC or the Department be trusted with this vital task? Several factors suggest not.The historical recordIn 2015/16, the Strategic Fuel Fund (SFF), then a subsidiary of the state-owned Central Energy Fund (CEF), sold off the country’s strategic reserve – comprising some 10 million barrels of crude oil – at $28 a barrel, which was well below the prevailing market price. The contracts concluded were thus economically unwise. However, they were also irregular and corrupt, as the Western Cape high court and the Supreme Court of Appeal (SCA) were later to find.Both the high court (in its 2020 ruling) and the SCA (in its 2022 judgment) were scathing about the role of the state. According to the high court, the conduct of Sibusiso Gamede, CEO of the SFF, was “riddled with irregularities.” In addition, “he had no problem with taking bribes” amounting to R22.6m.In addition, though Mr Gamede was the driving force behind the contracts, he had clearly not acted on his own. Instead, he had “repeatedly misled the Minister,” who had then “failed to apply her mind” in approving the sale. The SFF itself had also been culpable, for Mr Gamede “could not have achieved what he did without the acquiescence or supineness of SFF’s senior managers and directors.” Overall, said the high court, “the rot which allowed the impugned transactions to be concluded and implemented was pervasive, even if one man was the linchpin.” The various illegalities were so “clear and indisputable” that the high court set all the contracts aside, thereby returning the oil (still in storage in Saldanha) to the state’s ownership.However, the high court also found that some of the companies involved were innocent third parties. These buyers were entitled to reimbursement for the purchase prices, storage fees and other out-of-pocket expenses they had paid while the oil they had bought in good faith remained tied up in lengthy litigation.Astonishingly, the state appealed against this reimbursement ruling, claiming that the high court had disregarded “the public interest in preventing parties from benefiting from unlawful and corrupt contracts.” The SCA roundly rejected this claim, saying: “The public interest in preventing bribery is not advanced by requiring innocent third parties…to make losses.” The SCA added that both the SFF and the CEF had “demonstrated a startling failure to accept any responsibility for the unlawfulness of the transactions.” In these circumstances, “not compensating innocent parties for their losses would… ‘send out a message to officialdom that no matter how poorly they administer a state entity’s affairs, the court will see to it that the entity suffers no loss’.” The ongoing consequencesThough various innocent companies recovered their out-of-pocket expenses – but not the profits they had hoped to make – their confidence in the probity of the SFF and the CEF was badly dented, if not destroyed.One result is that the private sector has shown little interest in using the Saldanha storage terminal, where tanks with a capacity of 30 million barrels have been set aside for commercial use. Trust, once lost, is not easily regained – especially when better options are available in other countries with more reliable and less corrupt governance. The government’s solution, as reflected in its draft Policy, is now to force the private sector to help build up a strategic fuel reserve at its own expense. According to the Policy, the costly burden of building up a stockpile is one which the state “cannot carry alone, especially given fiscal constraints.” Yet the private sector has no tax revenues on which to draw. It also has sound reason to distrust the government’s probity as well as its capacity.Practical problems ignoredThe Policy ignores many practical problems. Seeking a ratio of 70% crude oil to 30% refined product makes little sense, given the country’s constrained refinery capacity. The Engen/Enref refinery at Durban closed down in 2020 following a fire. The Sapref refinery, whose owners halted operations in 2022 shortly before floods damaged the plant, was bought by the state’s Central Energy Fund for R1 and has yet to reopen.The Astron refinery in Cape Town still functions but can process only about 100,000 barrels per day (bpd). The Natref refinery in Sasolburg works too, but its capacity is similar, at 108,000 bpd. Together, these refineries meet less than 40% of South Africa’s daily domestic demand. (Sasol’s Secunda plant, which produces liquid fuels from coal, has a capacity of some 150,000 bpd but plays no part in refining crude.)In addition, the relatively small Astron refinery is the only one located near Saldanha, while there is no easy means to transport crude oil some 1,400 kilometres across the country to the Natref refinery at Sasolburg. Having millions of barrels of crude oil in storage on the west coast will thus do little to help businesses needing petrol and diesel in Gauteng. Why then put so much focus on crude, rather than refined products?Moreover, all oil imports will have to be handled by Transnet’s ports. Yet these, despite improvements in the past year, remain among the least efficient in the world. The Transnet multi-product oil pipeline has useful spare capacity, but it links Gauteng with Durban, which now lacks an operative refinery.In addition, storage capacity is mostly concentrated at major ports, far from the country’s industrial heartland. The private sector has many small inland tanks, but these are aimed at keeping fuel of different kinds moving through supply chains – not at long-term storage. The Policy thus acknowledges that the “construction of new tanks” will be required.How much all this is likely to cost is not explained. The Policy promises to provide a “calculation of an estimated cost of investment in storage infrastructure and additional stocks,” but then fails to include such figures. Comprehensive state controlThe Policy assumes that making the SANPC “the sole custodian” of the strategic reserve will ensure its sound management. The SANPC will thus be made responsible for “asset management, operation and maintaining the physical storage infrastructure,” as well as “the procurement and rotation of stock to prevent quality degradation.” Gwede Mantashe, minister of mineral and petroleum resources, will also play a crucial role. In particular, he will “hold the authority to declare a supply emergency and to authorise the release of strategic stocks into the market.”Under the Policy, decisions on release will be triggered at different levels. At Level 1, when “20% of refined supply is lost for more than two weeks,” there will be “voluntary industry stock-sharing.” At Level 2, when “40% of national supply” is lost and “commercial industry mandatory stocks are totally depleted,” there will be “a restricted release of stocks to essential services and key economic hubs.” At Level 3 – when there is “severe global supply shock or total failure of the import value chain impacting more 50% of supply” (sic) – the minister will declare “a national emergency”. This will result in a “mass drawdown” or “a wide market release” (sic) and “implementation of fuel ration” (sic). At Level 4, when there is “unprecedented price volatility reaching $145 per barrel threatening GDP growth,” there will be “a strategic sale of products in a competitive auction.” This description of how the release system is to work raises many questions. Since it is the loss of “20% of refined supply” at Level 1 that triggers initial stock sharing, why does the Policy put so much emphasis on building up crude oil supplies? At Level 2, who is to decide what “essential services” are to be supplied and what criteria will be used in making this assessment? If, under Level 4, a strategic sale is triggered by a price rise to $145 a barrel, will the entire reserve then be sold? And how will any such sale help ensure South Africa’s resilience to the price and/or supply shocks that might still follow?Other shortcomings in the PolicyThese problems with the Policy, which was approved by the cabinet on 1 July 2026 and then published in the Gazette, are compounded by many drafting errors. A couple of these have already been flagged, while Ruben Pretorius, a lecturer in political science at the University of the Free State, gives further examples.Notes Pretorius: “The executive summary says the government will hold 90 days of net imports, primarily as crude at Saldanha, with industry holding an additional 14 days of refined product. [But] [t]he obligation table four pages later says 60 days for the state and 21 days for industry, each split into 70% crude and 30% refined product.”Still more confusion arises thereafter, for the Policy also requires private companies to hold “‘a minimum of 21 days of refined product cover, with a 70-to-30 split between crude and refined product” (emphasis supplied). This wording makes no sense, as refined products do not include crude oil.At one point, moreover, the Policy identifies South Africa’s annual consumption of petroleum products at “approximately 30 million litres.” Elsewhere, it correctly puts the country’s yearly consumption at 27 billion litres. Comments Pretorius: “That is a three-orders-of-magnitude error, and the calculation built on it produces a total cost of R48-million for a two-week national fuel disruption, a figure the text then describes as roughly 0.7% of GDP. It is not. R48-million is roughly 0.0007% of GDP.”The Department may simply have written “million” where it meant “billion,” for R48 billion would indeed amount to roughly 0.7% of GDP. But that a thousandfold error slipped past both the Department and the cabinet is the point..Read more:.Oil market crisis deepens as gulf output slashed.Highlighting these errors is not “linguistic pedantry,” he adds. These basic mistakes point to carelessness or incapacity. If the state cannot produce a policy plan with “20 coherent pages,” how can it competently “manage 36 million barrels of fuel?”Notes Pretorius: “A stockpile is not a policy document. It is a multibillion-rand physical asset that must be procured honestly, rotated every three months, guarded against the people managing it, and released competently under crisis pressure by a state-owned company that has existed for barely a year.”This comment sums up the essence of the matter. It is all very well for the Department to put out a Policy (wrongly) claiming that “South Africa’s strategic petroleum stocks landscape has evolved from a traditional storage model into a dynamic pillar of national economic resilience.” It is quite another for a dysfunctional state to translate 20 pages of often inaccurate wording into the practical resilience so urgently required..*Dr Anthea Jeffery holds law degrees from Wits, Cambridge and London universities, and is the Head of Policy Research at the IRR. She has authored 12 books, including Countdown to Socialism - The National Democratic Revolution in South Africa since 1994, People’s War: New Light on the Struggle for South Africa and BEE: Helping or Hurting? She has also written extensively on property rights, land reform, the mining sector, the proposed National Health Insurance (NHI) system, and a growth-focused alternative to BEE..This article was first published by Daily Friend and is republished with permission..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

SA has just 13 days of fuel reserves as Gulf oil supply risks rise: Anthea Jeffery

Related Stories

BNC#9 | Dr Abedian Q&A: America's lost war, SA's "non-alignment", Israel-Palestine, oil's big moment

South Africa's untapped offshore prize: Namibia is booming next door. Why aren't we?

The Economist: China is now the world’s great oil power

Sasol cashes in on war-driven fuel price surge