Page 5 - DMEA Week 45 2022

DMEA COMMENTARY DMEA

Offshore assets and onshore supply gaps fields have not yet begun production, so they are
Avhapfani Tshifularo, the executive director of not yielding any oil yet.
the South African Petroleum Industry Associa- Even if oil was flowing from the new fields,
tion (SAPIA), disagrees. On October 31, Argus however, state-owned firms do not number
Media quoted him as saying that the presence of prominently among the shareholders in these
oil in the offshore zone would not be enough to projects. Moreover, the licence-holders do not
bring retail fuel prices down. For South Africa, appear to be working under production-sharing
he said, it will also matter who is leading the regimes, under which the government could
development of the fields. command a portion of the output.
“Public representatives talk to us as South
Africans as if they have control over what hap- A narrow view of the question
pens in the world oil market. They don’t have But by focusing on the question of whether Pre-
control,” he remarked. toria can claim a share of production, Tshifularo Is South Africa’s
The problem is that privately-owned com- is also taking an unnecessarily narrow view of
panies will be leading the development of new the question. only possible
offshore oil deposits instead of the government, In other words, if he is arguing that the gov-
Tshifularo said. As a result, he said, Pretoria will ernment should be striving to ensure that South response to
not be able to secure low-cost crude and then African consumers have steady access to ample
direct it to local refineries so that it can be sold supplies of low-priced fuel, is the government’s challenges in
at a price below the world market rate, he said. only option to impose a solution from the sup- the downstream
Instead, he explained, it will have to pay the ply end? Or might it consider crafting a solution
international price to the private-sector buyer, from the pricing end, such as using development sector to impose
leaving it with no money to cover the cost of a as a jumping-off point for the creation of a new
subsidy, he explained. stream of revenue for the state budget so that a solution from
“To have leverage, you have to hold the feed- funds can be collected for a subsidy programme?
stock. Then you can channel at least part of the If so, could it start mandating the inclusion of the supply end?
revenue into subsidies ... So in simple terms, terms in development and off-take contracts
having oil and gas discoveries is not going to that that made provisions for this approach?
lower retail fuel prices in South Africa,” he said. Or could it pursue policy changes from
another angle instead? For example, could it
Current conditions unfavourable discuss production-sharing arrangements for
Moreover, he added, the government does not assets in frontier zones, such as ultra-deepwater
even have a mechanism to put a subsidy in place fields where state-owned companies will need
unless it first makes some changes in policy. assistance and expertise from international
Tshifularo has a point when he notes that majors?
under current conditions, there is no easy path Whatever the case, South Africa would ben-
by which South Africa’s government could easily efit from taking a more flexible approach to the
secure low-cost supplies of hydrocarbons for use issue of how best to integrate offshore develop-
as feedstock in fuel production. First and fore- ment opportunities with domestic supply gaps
most, the country’s newest and deepest offshore than Tshifularo has done. ™

South Africa’s domestic fuel prices are influenced by both internal and external factors (Image: SAPIA)

Week 45 10•November•2022 www. NEWSBASE .com P5