Fri, 05 May 2017
Chinese government officials have hinted that oil companies from the Asian country could purchase more African oil downstream operations, this follows China Petroleum & Chemical Corporation’s (Sinopec) purchase last month of a controlling stake in Chevron’s southern African subsidiary, Caltex.
Sinopec paid $900m for Chevron equity in the Chevron South Africa (CSA) refinery in Cape Town, oil storage facilities, a lubricants factory in Durban and the Caltex service station distribution network across South Africa and Botswana. It had been reported that other companies were interested in buying the assets, including oil trader Glencore and French oil giant Total but they dropped out of the bidding. The government’s Central Energy Fund also made an offer for Caltex last year.
Under the deal, Sinopec has bought 100% of Chevron Botswana and 75% of Chevron South Africa, while the remaining 25% will be held by South African black empowerment investors, as required under South African law, plus an employee trust. The refinery, which will be Sinopec’s first in Africa, has production capacity of 100,000 b/d, while Caltex owns and operates 820 service stations.
In a statement, Sinopec revealed: “The SPA has already been filed with the Chinese government and remains subject to regulatory approvals in South Africa and Botswana. With a growing middle class, demand for refined petroleum in South Africa, the largest country in the region, has been increasing at an average annual rate of nearly 5% during the last five years, currently reaching a total of approximately 27m tonnes.” Aside from the fuel sales, the company will benefit from 220 retail outlets attached to service stations.
Sinopec said that it intends to maintain the company’s existing operations and workforce, while upgrading its assets across the region. It then plans to start rebranding the retail network in five or six years’ time. This upgrade will presumably involve the modernisation and expansion of the Cape Town refinery. Cleaner fuel standards are being introduced in South Africa, which will require improvements in the nation’s refining capacity.
The new standards were supposed to have been introduced this July but the refining industry and government have been in dispute over how the refinery upgrades should be funded. This dispute may have precipitated Chevron’s withdrawal from the country; the US firm put the business up for sale in 2014. South Africa has five other refineries with combined production capacity of 600,000 b/d, including the two synthetic fuel plants at Mossel Bay and Secunda, which used natural gas and coal as feedstock respectively.
In 2012, Sinopec had signed an agreement with South African national oil company PetroSA to help develop a new refinery at Coega with production capacity of 360,000 b/d but the project has been postponed because of rising costs and economic problems in South Africa.
A spokesperson said: “With this investment, Sinopec looks forward to becoming an integral part of South Africa and Botswana’s local economies.” He added that the company would seek to contribute to “the development of the indigenous oil industry”, which could suggest that it is also interested in [...]