Oil Majors and Traders Vye for Shell’s South African Assets
Oil trading giants and the national oil companies of some of the Middle East’s biggest oil producers are in the race to buy Shell’s South African service stations as they look to expand their access to downstream assets.
The world’s largest oil firm and oil exporter, Saudi Aramco, the national oil company of Abu Dhabi, ADNOC, Oman’s OQ Trading, and international trading giant Trafigura are interested in buying Shell’s gas stations in South Africa, sources with knowledge of the matter told Bloomberg this week.
Trafigura and the Middle Eastern NOCs are joined by South Africa’s Central Energy Fund, which owns state oil and gas firm PetroSA, as well as Sasol, in the race for Shell’s service stations, according to Bloomberg’s sources.
Shell said earlier this year that it is preparing to divest from downstream operations in South Africa as a result of an internal portfolio review.
Shell holds a majority share in Shell Downstream SA (SDSA), which was formed by the merger agreement between Shell South Africa and Thebe Investment Corporation a decade ago.
Shell is retaining its upstream assets and even plans to drill ultra-deepwater wells offshore South Africa, looking to expand the recent discoveries off Namibia into South Africa’s west coast.
However, the UK-based supermajor is reshaping its global downstream portfolio and the South African assets are up for sale.
Trafigura already has a presence in Africa with its unit Puma Energy.
Engen, the owner of the biggest gasoline stations network in South Africa, was sold last year to Vivo Energy, a subsidiary of the world’s largest independent oil trader, Vitol Group.
Trafigura and Sasol were also in competition to buy Engen, but Vitol won the race.
Trafigura, Vitol, and the other major independent traders have been snapping up refineries and retail network assets that the biggest international oil and gas producers are divesting as part of strategic portfolio realignment.
In this way, commodity traders gain direct access to a refinery to which they can send part of the crude they sell and become larger players on the crude options and futures market to hedge their exposure to physical crude oil.
In recent months, the largest independent oil trading houses have acquired several refineries from Big Oil worldwide in consortia with other companies.
Vitol Group signed a deal last year to buy 35% of the Saras refinery in Italy after reaching an agreement with members of the Moratti family.
Trafigura said in April that Rhône Energies, its consortium with Entara LLC, has entered into exclusive negotiations to buy the Fos-sur-Mer refinery and the Toulouse and Villette de Vienne terminals from ExxonMobil’s local unit Esso.
Glencore also made the list of the biggest oil traders buying refineries from Big Oil. In May, Shell reached an agreement to sell its refining and chemicals assets in Singapore to CAPGC Pte. Ltd., a joint venture company between Chandra Asri Capital Pte. Ltd. and Glencore Asian Holdings Pte. Ltd.
The commodity trading industry currently has the means to reinvest strategically in long-term deals and strategic decisions, according to consultancy Oliver Wyman. One winner move for reinvesting the profit windfalls could be to invest in assets, “which gives traders greater optionality and influence over the commodities they trade,” Oliver Wyman said in a report earlier this year.
For their part, the NOCs of the top Middle Eastern producers are looking to buy more downstream assets abroad to either supply crude for refineries or sell their refined petroleum products to service stations.
Saudi Aramco, for example, continues to be on the lookout for acquisition opportunities in the downstream and LNG, a senior executive told Reuters in an interview.
In recent months, Aramco has struck several deals in refining and petrochemicals in China and LNG in the United States and Australia.
Earlier this year, ADNOC bought an 11.7% stake in Phase 1 of NextDecade’s Rio Grande LNG export project in Texas, as Abu Dhabi’s national oil company announced its first strategic investment in the U.S.
