4 September 2008
Johannesburg — VENEZUELA seems awfully keen to attract PetroSA to drill and invest in its Orinoco oilfields. Should SA be as keen on the partnership?
Having driven oil majors such as Exxon and ConocoPhillips out of Venezuela, President Hugo Chavez's government is looking for new partners to exploit its rich oil reserves.
Visiting SA this week, Chavez said his country was interested in using SA's oil storage capacity and helping to expand SA's refining capacity. Venezuela helped Cuba revive its refineries and has been building plants in Nicaragua, Brazil and Jamaica.
It's all part of Chavez's mission to reduce dependence on the west. And on the face of it, partnering with Venezuela could help SA improve its energy security by diversifying its sources of fuel.
State-owned PetroSA, whose main asset is the old Mossgas, is meant to play a growing role in procuring crude oil to meet SA's needs, in line with the government's energy master plan. PetroSA also has plans to build a $7bn new crude oil refinery at Coega. The government, clearly, envisages that a tie-up with Chavez would help to serve both those purposes. PetroSA will do a 6-to-18-month feasibility study on the Venezuelan fields and details of any deal are still a long way off.
But it is not at all clear that a partnership would enhance SA's fuel security or cut its fuel costs. Venezuela's oil is of a very specific kind: its "heavy sour crude" tends to trade at a discount on world markets because it costs more to upgrade to saleable product, and produces a smaller proportion of higher-value products, than does lighter, higher-quality crude.
SA's existing refineries are designed mainly for lighter crude and might not be able to use Venezuela's without costly modification. Building a new Coega refinery for Venezuela's heavier crude might be feasible. But it would tie PetroSA to just one supplier, which is a big risk. Energy security is about having options, not creating dependency. A partnership with Venezuela would not necessarily enhance our security of supply.
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