KEY POINTS
Saudi Aramco, Trafigura, and others are competing to buy Shell’s South African gas stations.
Shell is selling its downstream assets but keeping its upstream operations.
The race highlights a global trend of oil companies expanding into the refining and retail sectors.
Shell, the insolvent oil major, is selling most of its service stations in South Africa, with the global oil giants, including Saudi Aramco, Trafigura, and Abu Dhabi’s ADNOC fiercely bidding for it, These energy powerhouses have shown interest in Shell’s downstream business to further their growth strategies to enter one of Africa’s biggest energy markets.
From the various sources close to the development, it has emerged that several big names are interested in the available sale. These are Oman’s OQ Trading and South Africa’s Central Energy Fund (CEF), which owns PetroSA, the country’s state oil and gas firm. Another contender in the race is Sasol, a premier South African energy firm. Shell’s plans to dispose of these assets came after the company conducted a portfolio review exercise. However, Shell wants to keep upstream business including offshore exploration west of South Africa.
Oil Majors Battle for Control
This move to divest Shell’s gas stations is part of the oil major’s ongoing global strategy to reshape its downstream operations. Shell has a 60 percent stake in Shell Downstream South Africa (SDSA), with which it entered into a partnership a decade ago with Thebe Investment Corporation. Nevertheless, the company has decided to leave this downstream operation, as the door will be open for a new owner.
For the buyers, to purchase Shell’s gas stations would mean instant access to a broad sales outlet in South Africa. Trafigura, which is a major oil trading company, which already operates in Africa through its subsidiary Puma Energy, is one of the top contenders. This would not be the first time when Trafigura has expressed a desire to increase its role in that area. The previous year, Trafigura had bid for Engen South Africa’s largest gasoline network but lost out to the Vitol Group-owned company known as Vivo Energy.
The world’s largest oil company – Saudi Aramco is also seeking downstream opportunities. Aramco has been quite active in the global market in acquiring additional refineries and gas stations, a long-term plan aimed at controlling a majority of crude oil supply and RPP. The Middle East’s national oil companies (NOCs), like ADNOC, are also in the hunt, driven by a desire to grow their refining and distribution networks abroad.
Global Oil Strategy in Movement
The race to acquire Shell’s South African holding is indicative of an even wider trend in the oil industry. With these acquisitions, traders assume the role of refineries’ operators, optimizing their operations and ensuring consistent feedstock for their processing plants.
This systematic long-term reinvestment of these traders has allowed commodity traders to wield greater influence in the global oil market. Companies such as Trafigura and Vitol that own refineries and service stations can shield themselves from the volatility of the physical crude oil market and integrate into both upstream and downstream activities.
