Risks lurk in oil deal with fiery Chavez
September 7, 2008
By Donwald Pressly
Cape Town - The jury is out on whether the record of understanding signed between the South African government and Venezuela this week will have positive spin-offs such as discounted crude oil and a multibillion rand investment in a special refinery that could be built at Coega.
It may, conversely, amount to no more than embracing a populist left-winger whose political fortunes may be on the wane, some commentators argue.
President Thabo Mbeki welcomed Venezuelan President Hugo Chavez - dubbed the new Fidel Castro by Democratic Alliance (DA) foreign affairs spokesperson Tony Leon - at a Pretoria banquet on Tuesday.
The banquet was attended by Reserve Bank governor Tito Mboweni, who heard Chavez argue that oil reserve money should be under the control of a country's head of state and central banks should not be independent. Notably absent was ANC president Jacob Zuma.
The Institute for Global Dialogue's South America expert, Lyal White, and the SA Institute of International Affairs' Tom Wheeler both questioned if this was the type of political ally South Africa wanted.
White, who attended the banquet, said South Africa should perhaps rather woo Brazil, which had a more sensible leader and, like South Africa, managed a free market economy while rolling out appropriate social investments by the state. It had also discovered oil-rich fields recently.
White argued that Chavez - whom he reported did not seem to be taken too seriously when he spoke at the banquet - was more than a bit of a radical and that multinational companies - not only from the US but even from Mexico, Argentina and Brazil - had been bitten by his nationalisation policies.
White noted that Venezuelan crude oil was high in sulphur while South Africa's refineries were geared for lighter crude, meaning new technology and refineries would be required.
Nhlanhla Gumede, the chief director of hydrocarbons at the department of minerals and energy, said it was feasible the deal between PetroSA and the Venezuelan state oil company could lead to a joint venture to build a new refinery at Coega.
Gumede argued strongly that forging closer ties with Venezuela would diversify the oil supply.
"There are major positives for South Africa," he said, noting that crude oil imports were currently dominated by private sector multinational companies, controlling more than 80 percent of the procurement.
By involving the state oil company, PetroSA, it provided South Africa's government with greater leverage to negotiate pricing. It was envisaged the Coega plant would produce about 400 000 barrels of oil a day, not far off current consumption of about 550 000 barrels a day.
He did not believe Chavez was such a political risk, pointing out that about 3.4 million barrels of oil is supplied to the US - its political bête noire.
Gumede argued that it made economic sense to import oil from a fellow country of the South and reduce dependence on just two oil suppliers - Iran and Saudi Arabia.
He said there was sense in South Africa building another refinery as about 25 percent of the cost of oil was added in the refining process.
"The participation of Venezuela is very welcome," Gumede said.
Meanwhile, PetroSA chief executive Sipho Mkhize said the two governments had "executed a number of official trade agreements".
They had discussed a co-operation framework in the area of oil and gas. It was envisaged that PetroSA would participate in exploration and production in the Orinoco oil belt.
Meanwhile Leon, the former DA leader, said he imagined that the supply of oil at a discounted rate "might be more illusory than real", a view that White shared.
There was "a big down side" politically, Leon said, noting: "Chavez is a demagogue with a revolutionary agenda. This will further align South Africa in a particular direction."
He also warned against alleged back room deals that had previously dogged PetroSA involving Imvume and money to the ruling ANC.
Wheeler was just as outspoken, saying there could be a political cost to South Africa "cosying up" to a maverick who believed in 21st century socialism and who alienated international business.
|
|
