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The model that SFF currently have for storing emergency crude oil is an outdated model based on the experience of sanctions and is not currently best international practice for the holding of strategic crude oil stocks.
During the era of sanctions, the pre-1994 government stored a vast quantity of strategic crude oil stock and procured most of the commercial crude oil stock required by the domestic refineries.
The pre-1994 business model meant that SFF had a huge amount of working capital tied up for very long periods of time (15 years) until the rotation of stock.
This decreases rather than increases economic value due to the loss of value through long term storage.
At that stage, security of supply was attained through the storage of crude oil for strategic stock for 5 years and supplying the commercial crude oil requirements to the domestic refineries as the country had surplus refining capacity and was therefore self-sufficient in terms of security of supply.
This stockpile was last sold in in 1999 to Sasol and Total to fund the fiscus.
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