Oil is and has been critical to several sectors of the South African economy in recent history and with the exception of the crude produced from coal via the SASOL process the country is completely dependent upon imports to satisfy domestic demand.

Although SASOL started producing oil from coal in 1955 its origins can be traced back to 1895 when coal was first mined on both sides of the Vaal River near Vereeniging. The mining house, Anglovaal, was interested in the large deposits of low grade coal in this area and further south in the Free State. There was considerable interest in coal chemistry during the 1920s, and in 1927 a Government White Paper was published recommending the development of gasification and carbonization processes.

In the early 1930s, Anglovaal and the British Burmah Company established the South African Torbanite Mining and Refining Company (SATMAR) to mine oil shales near Ermelo, to distil off and refine the oil, mainly for petrol. Anglovaal's interests in oil-from-coal were extended when rights to the German Fischer-Tropsch process were acquired. In 1938 Hendrik van Eck, Anglovaal's consulting chemical engineer, appointed Etienne Rousseau as research engineer at SATMAR to pursue this initiative. Franz Fischer visited South Africa in 1938 to assist in getting the venture off the ground. However, World War II intervened.

During the war Anglovaal maintained its interest in oil-from-coal and entered into negotiations with the M.W. Kellogg Corporation. There was considerable interest in the USA at that time with the US Government considering an oil-from-coal plant on the west coast. In 1945 Anglovaal applied to the SA Government for assistance to establish a plant based on the American Hydrocol process. After protracted negotiations a licence was finally issued in 1949. Because of devaluation and involvement with gold mining developments, Anglovaal needed assistance to raise the required £20 million. The World Bank expressed polite interest in the project but no money was forthcoming.

In the meantime negotiations were proceeding with the Kellog Corporation for licensing of its patents and assistance in the design and erection of a plant. However, Rousseau believed that a closer look needed to be taken at what the Germans had been doing with the Fischer-Tropsch process since the war. He obtained an offer from the Lurgi Gesellschaft, Oberhausen-Hollen, and Ruhrchemie Aktiengesellschaft, through an Arbeitsgemeinschaft (ARGE), of the designs for and the right to operate plants for the production of synthesis gas from coal and the Fischer-Tropsch process.

The upshot was the establishment, on 26 September 1950, of the Government-sponsored South African Coal, Oil and Gas Corporation Ltd., commonly called SASOL. This acronym arose from Rousseau's initial suggestion that the company be called South African Synthetic Oil Limited. Rousseau, SASOL’s first employee, was appointed managing director, a position he held for 18 years. Both Kellog and ARGE processes were used; the former produced high proportions of medium octane petrol, LPG, and a range of chemicals; the latter produced mainly higher boiling waxes and oils, including diesel.

The plant, and its associated town, Sasolburg, were established in the Free State, just south of the Vaal River. All did not run smoothly as Rousseau recalled, "I must tell you honestly that there were times in SASOL’s early years, times when we had trouble, big trouble, when I felt that my main charge was to keep up the courage of our men. I certainly could not allow myself a moment's despair". Despite these setbacks, SASOL chemists and engineers managed not only to get the plant working satisfactorily but also to devote time to improving efficiency and to widening the product range. Feed-stocks for the manufacture of synthetic rubber, fertilizers and secondary chemicals followed. Together with Total SA and the National Iranian Oil Company, a refinery (NATREF) was established in Sasolburg in 1960. Imported petroleum was refined and cracked to produce ethylene for plastics, and pipeline gas was supplied in increasing quantities to industry.

It was also during this period that calls for an oil embargo against South Africa were issued at a conference of African leaders at least as early as 1960 and in 1964 the Organization of African Unity (OAU) endorsed general oil sanctions directed at the Apartheid state. In the wake of this ever increasing move to enforce an oil embargo, the Nationalist government founded the Southern Oil Exploration Corporation (Soekor) in 1965 to seek out new deposits, but in its first eight years, 99% of the holes it drilled came up dry despite the estimated 700 million rand that was spent in its quest.

In late 1973 African efforts against South Africa became entwined with Middle-Eastern policies as Arab states sought black African backing against Israel while the Africans saw an opportunity to secure Arab support for an oil embargo against South Africa which was duly formalized with a “Resolution on Cooperation between African and Arab states”. His diplomatic deal was most effective in its early stages, but black African resentment later grew as it became apparent that Arab states were unwilling to offer oil at preferential prices or to provide the degree of financial assistance anticipated. The Arab embargo on Israel ended in March 1974 but the embargo of South Africa was not terminated. The OAU stepped up pressure on South Africa in 1977 by establishing a Committee of Seven to gain the cooperation of the Organization of Petroleum Exporting Countries (OPEC) whose members verbally backed oil sanctions since the Iranian revolution, yet South Africa continued to receive most of its oil from the Arab states and Iran. Western states have enacted embargoes full of loopholes and countries like Norway, Denmark and Britain continued to play significant roles in supplying oil to the Apartheid regime despite their moral stands that have seen ineffective bans and prohibitions. In practice, European embargos had served as constraints rather than barriers because the oil continued to flow.

In the 1980’s antiapartheid guerillas cut through security fences and set off explosive charges alongside three Natref oil refinery storage tanks in Sasolburg with damage estimated at $9 million. Further acts of sabotage happened in Secunda and Springs. The ANC (as a liberation movement not as a political party) claimed responsibility for these attacks and in a later statement declared: “The ability of the South African regime to maintain its aggressive actions against neighbours and to use its repressive apparatus against the oppressed majority in South Africa is and will continue to be related directly to the quantity of oil the regime is able to obtain from outside South Africa.”

The struggle against apartheid entered a new stage as oil installations came to be considered prime targets and over the next few years, regular attacks were carried out; however in the black liberation struggle, sabotage is a highly dramatic act that is largely symbolic. As the battle over apartheid had taken on new dimensions, the oil embargo had been adopted as a weapon in the anti-racist arsenal imposed in conjunction with a moral crusade, but which did not succeed in restricting the flow of oil to South Africa because governments, oil companies and shipping lines routinely took the moral high ground in public but clandestinely continued to place economic interest before all other considerations.

In September 1978 the UN Special Committee against Apartheid called upon the Security Council to impose a mandatory embargo as did the General Assembly in January 1979 with a vote of 105 to 6 (with 16 abstentions). The negative votes were cast by the US, Britain, France, West Germany, Belgium and Luxembourg with Canada joining the opposition later. The General Assembly’s resolutions grew increasingly detailed, but they were powerless to act under the UN Charter and could only assert a moral influence because its pleas to the Security Council were never translated into mandatory sanctions and so the UN rhetoric was belied by its actions and while Apartheid was roundly condemned, steps to counter it were often taken circumspectly. Similarly, Western governments were often vocal in their condemnation of Apartheid while companies continued to serve as the backbone of South Africa’s oil sector. British and West German Banks have been particularly active as have US, French and West German engineering firms. The distribution of oil was dominated by five major oil companies which controlled 85% of the market. British Petroleum (BP) and Shell played the largest roles with Mobil and Caltex (both US) and Total (French) also reaping their share of the economic pie.

The South African government became increasingly desperate to secure the oil so desperately needed to supply domestic demand and as a result the country became a target for numerous unscrupulous brokers and hair-brained schemes and scams. In the late 1970’s the ‘sniffer plane’ was a purported technological breakthrough enabling an aircraft to locate offshore deposits and after wasting up to four times more than the disclosed 4.9 million rand the advisor to the Ministry of Industry determined the process a fraud.

Another such example was the case of the Supertanker ‘Salem’ whose delivery of oil to Durban in 1979 at first seemed to be just another example of sanctions busting, but an extensive fraud soon uncovered made the ‘Salem’ case the most complex and fascinating maritime scandal ever. At least 25 countries were touched and 13 separate investigations with legal proceedings eventually being brought in the US, Greece, the Netherlands, Britain and Liberia.

It all began when Fred Soudan, Anton Reidel and Nikolaos Mitakis (from the US, Netherlands and Greece respectively) managed to secure an oil delivery contract with the Strategic Oil Fund and received financing from a South African bank to purchase a tanker, an oil company and insurance. The three men with no experience in the oil trade arranged to hijack a cargo by placing their own officers and crew aboard the ‘Salem’ and then chartering it to a legitimate oil company seeking transport. Pontoil turned out to be the unsuspecting party when more than 196000 tons of crude was loaded in Kuwait. However the oil was sold to Shell who believed that the vessel was taking its cargo to France, but disguised as the ‘Lema’ (and) it was diverted to Durban by its master Dimitrios Georgoulis. Over 180000 tons of crude were discharged and the masterminds were paid minus the amount forwarded to purchase the ship. The 16000 tons of crude still in its tanks, the ‘Salem’ was filled with seawater to appear fully laden and then scuttled off the coast of Senegal. Investigations into the ‘Salem’ affair were undertaken by insurance companies and the many governments that were concerned. Even though the perpetrators were charged and sentenced, no money was recovered and the major loser was South Africa who used public funds to pay Shell $30.5 million in an out-of-court settlement.

In 1981 an important potential source of oil was discovered at Mossel Bay where a major gas deposit was found and throughout the rest of the 80’s and 90’s more offshore fields were discovered at Sable, Oryx and Oribi that ultimately led to the formation of PetroSA in 2002 from the merger of Mossgas, Soekor and the Strategic Fuel Fund Association.

Despite these seemingly positive developments though, South Africa only has relatively small deposits of oil and natural gas and still relies on coal production for most of its energy needs and has a highly developed synthetic fuels industry, mainly derived from this relatively abundant natural resource.
South Africa's economy is structured around large-scale, energy-intensive mining and primary minerals industries, pushing its energy intensity to above average levels, with only 10 other countries having higher commercial primary energy intensities. South Africa's energy sector is critical to the economy, contributing about 15 percent of the country's GDP.

According to Oil and Gas Journal (OGJ), South Africa had proven oil reserves of 15 million barrels as of January 2008. All of the proven reserves are located offshore southern South Africa in the Bredasdorp basin and off the west coast of the country near the border with Namibia. In 2007, South Africa produced 199,000 barrels per day (bbl/d) of oil, of which about 16,000 bbl/d was crude and 160,000 bbl/d was synthetic liquids processed from coal and natural gas. About 66 percent of South Africa’s total crude oil consumption is imported: in 2007, South Africa consumed 505,000 bbl/d of oil, of which 306, 000 bbl/d was imported.

According to the South African Petroleum Industries Association (SAPIA), the majority of crude oil imports destined for South African refineries come from the Middle East, with Iran and Saudi Arabia being the country’s chief suppliers. South Africa also imports crude oil from Nigeria and Angola, among others.

Prior to 1999 South Africa had negligible trade relations with Nigeria but since the signing of the bilateral trade agreement between these two countries, the situation has undergone a complete metamorphosis. South Africa exports a wide variety of goods including machinery, electrical equipment, appliances, wood, paper, waste, prepared foodstuffs, beverages, plastics, rubber, chemicals and base metals but in contrast, oil makes up close to 97% of imports from Nigeria amounting to in excess of R4 billion.

This was began in 1999 when Olusegun Obasanjo became the democratically elected president and South Africa was awarded the right to market 50 000 barrels of Nigerian oil per day and in 2003 ex-president Thabo Mbeki intervened to ensure that this figure was increased to 120 000 barrels per day. However, the South African government has chosen to pass on the rights to market this oil to a shady company – the South African Oil Company – which is registered in the Cayman Islands. The South African Oil Company is 70% owned by a Nigerian-American businessman by the name of Jakes Lawal but due to the Islands legal system which protects the identity of shareholders, the remaining 30% has not been conclusively established although it is interesting that the South African Oil Company has a sister company registered in South Africa whose shareholders include leading figures in the ANC hierarchy, further entrenching what is seen by many as a culture of self-enrichment which has hamstrung justice and equality; and plaguing development and progress on the continent for centuries.

This is probably one of the most serious indictments of our democratically elected government which still chooses to plead diplomatic ignorance in the face of human rights abuses across Africa where trade agreements are gradually establishing South Africa as the capitalist powerhouse of the continent.