Shell Exits South African Downstream Market

Oil Giant Divests Stake in Local Unit After Strategic Review

by Victor Adetimilehin

Energy giant Shell has announced its decision to exit South Africa’s downstream market, following a comprehensive review of its global operations. The move comes after more than a century of Shell’s presence in the South African market.

Reshaping Downstream Portfolio

In a statement released on Monday, Shell explained that the decision to divest its majority stake in Shell Downstream South Africa (SDSA) aligns with the company’s strategy to reshape its downstream portfolio. The company did not disclose a specific timeline for the divestment process.

SDSA is a joint venture formed in 2014 through the merger of Shell South Africa’s marketing and refining businesses with Thebe Investment Corporation, a black empowerment company. Thebe holds a 28% stake in the joint venture.

While exiting the downstream market, Shell maintains its commitment to exploring South Africa’s offshore oil and gas reserves. This stance has drawn criticism from environmental groups who have taken legal action against the company’s exploration activities.

Future of SDSA Operations

Shell emphasized its commitment to ensuring a smooth transition during the divestment process. The company intends to maintain SDSA’s operational capabilities and brand presence throughout the sale. Efforts to reach Thebe spokespersons for comment were unsuccessful at the time of writing.

The divestment announcement comes amidst ongoing challenges in South Africa’s refining sector. Sapref, one of the country’s largest refineries and a key asset of SDSA, has been inactive since 2022. The shutdown resulted from a joint decision by Shell and BP, Sapref’s co-owner, following a spending freeze. Flooding in the same year further damaged the refinery, which previously supplied roughly 35% of South Africa’s refining capacity.

South Africa Seeks Solutions for Energy Security

The closure of Sapref, along with the earlier shutdown of Enref, South Africa’s second-largest refinery, has exacerbated the country’s dependence on imported refined petroleum products. The Central Energy Fund (CEF) expressed interest in acquiring Sapref two years ago, citing concerns about national energy security. However, an energy official speaking on condition of anonymity stated that the CEF could not comment due to a non-disclosure agreement with the involved parties.

The future ownership of SDSA and the fate of Sapref remain uncertain as Shell exits South Africa’s downstream market. The divestment is likely to have a significant impact on the country’s energy sector, with implications for fuel security, employment, and the broader economy.

Source: Reuters

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