Jeff Radebe justifies oil exploration in South Sudan

Energy minister Jeff Radebe has defended the country's $1bn involvement in oil exploration in South Sudan, saying it was aimed at securing affordable oil supplies for SA. 

The minister called a media briefing on Thursday to justify SA’s involvement in the project in the South Sudan and to reject an article in the Sunday Times about the so-called “dodgy deal”.

The Sunday Times reported that Radebe's cabinet colleagues said he the minister may have flouted government processes as the deal had not come before the cabinet and did not have approval from the Treasury.

A Treasury official told the publication that it made no sense for SA to make an investment of that size when the country was trying to boost its economy by attracting foreign investment. The publication reported that the minister's team had already spent about R20m pursuing the mystery deal, including hiring a private jet to travel to the underdeveloped country.

Radebe was accompanied on Thursday by the Central Energy Fund (CEF) acting CEO Sakhiwo Makhanya, the acting CEO of the Strategic Fuel Fund (SFF) Godfrey Moagi, acting director-general of the department of energy Zizamele Mbambo and deputy director-general Tseliso Maqubela.

His media briefing followed Wednesday’s cabinet meeting at which the matter was discussed.

Radebe said the estimated cost of $1bn (over R14bn) covered the cost of the oil block, pipeline and refinery which would be spread over a period of 10 years. The project was at a feasibility stage. The joint investment project value chain would include an exploration block, a pipeline, a new refinery and a new terminal.

Once the business case had been established, SA and South Sudan would decide on their relative equity stakes in the project and whether other investors would be required. He said it was premature to comment on how the project would be funded if the decision were taken to invest in it.

Radebe said noted that SA was a net importer of crude oil and was engaged with other African countries on the continent to secure access to it to ensure self-sufficiency and to find ways to mitigate fluctuations in fuel prices in the long term. Exploration was a costly but necessary exercise and SA was also engaged with Nigeria, South Sudan and Equatorial Guinea for this purpose.

South Sudan was a significant oil producer with estimated reserves of 3.5-billion barrels of crude oil. It also had 30-trillion cubic feet of natural gas in estimated reserves. The country’s reserves were ranked the third largest on the African continent after Nigeria and Angola.

“The country is landlocked and to get its oil to the market it is dependent on a pipeline passing through Sudan and incurs significant logistical costs. It is envisaged that a joint investment project will assist South Sudan in finding an additional export route and in turn bring strategic oil reserves to other markets including SA South Africa.”

Radebe said President Cyril Ramaphosa had empowered him to sign a government to governmentmemorandum of understanding (MOU) with South Sudan. This MOU had been submitted to parliament, and since the project was still at a feasibility phase, it so did not at this stage require cabinet or Treasury approval at this stage.

The minister noted that SA’s relationship with South Sudan dated back to the liberation struggle and SA had taken a political position to support South Sudan in its social and economic development long before he became minister of energy.

Radebe said six experts had been assigned to the South Sudan project and to date no more than R2.2m had been spent including personnel costs and travel. He dismissed the Sunday Times claim that  R28m had been spent. A private jet had to be hired to travel to the South Sudan because of a “critical business need”.

The minister denied the report that said it was incorrect as the newspaper claim that the SFF board had rejected the expenditure related to the project and that the CEF had rejected the project as alleged because it had never been formally tabled before its board for approval.

“The assertion that two foreign governments have done a feasibility study and found that the venture did not make sense is not corroborated by the level of interest demonstrated by the activities of other countries in South Sudan,” Radebe said.

“Out of five members of Brics countries, three major players in the petroleum sector [Russia, China and India] are already in Sudan. In addition other multinational companies have made significant investments in the country. Other important countries in South Sudan are Malaysia, Nigeria, Kuwait and Saudi Arabia.

“Some oil majors have shown interest to work with SA to unlock the potential of South Sudan,” Radebe said. This involvement had taken place despite the war going on in the country.

Asked about the incompatibility between South Sudanese oil with South African oil refineries, Moagi said the crude oil could be swapped on the international market or refined in compatible refineries.

He said it was international best practice in the oil exploration and production industry especially in countries that have a high demand which cannot be met by domestic production to have equity interests in oil producing blocks outside their countries. “This project if fully executed will bring similar value for South Africa,” Radebe said.

ensorl@businessday.co.za