South Africa’s state-owned CEF inks deal for idled SAPREF refinery
bp PLC’s bp Southern Africa (bpSA) and Shell PLC subsidiary Shell Downstream South Africa (SDSA) have found a buyer for their 50-50 joint venture South African Petroleum Refineries (Pty.) Ltd.’s (SAPREF) previously idled 180,000-b/d refinery in Durban, KwaZulu-Natal Province, South Africa (OGJ Online, Feb. 11, 2022).
As part of a sales purchase agreement concluded in late-May 2024, Central Energy Fund SOC Ltd. (CEF)—the state-owned company responsible for ensuring South Africa’s energy security supply under the Department of Mineral Resources and Energy (DMRE)—has agreed to buy bpSA and SDSA’s respective 50% ownership interests in SAPREF land and other associated assets, including the mothballed refining operations, DMRE and bpSA said in separate releases.
In addition to SAPREF processing units, CEF’s purchase will include crude oil and finished product tanks, as well as pipelines connecting the SAPREF refinery to the Port of Durban’s Island View terminal and offshore single-buoy mooring used for crude imports.
Still subject to regulatory approvals, the sale would exclude SAPREF itself, as well as bpSA’s marketing businesses, other Island View terminal operations, and the bpSA-SDSA 50-50 JV Blendcor (Pty.) Ltd.’s lubricants blending and grease manufacturing business, according to the parties.
Acquisition of the SAPREF assets will form the hallmark of CEF’s investment and growth strategy in the energy value chain that aims to create a solid foundation for addressing future challenges facing South Africa’s energy security amid the country’s declining domestic refining capacity which, to date, has left the nation a net importer of refined petroleum products, DMRE said.
According to South African Petroleum Industry Association’s (SAPIA) first-quarter 2024 report, dwindling in-country refining capacity since 2020 has required South Africa to import 60% of its overall supply of finished fuel imports to meet regional demand, up from 35% in first-quarter 2020.
Once equipped with six domestic refineries with a combined capacity to process 703,000 b/d of crude into finished products, as of yearend 2023, South Africa had only one fully operable 100,000-b/d refinery at Milnerton, in Cape Town, operated by Glencore PLC-owned Astron Energy (Pty) Ltd., results of OGJ’s annual worldwide refining survey showed.
In late 2023, TotalEnergies SE agreed to sell subsidiary TotalEnergies Marketing South Africa (Pty) Ltd.’s minority ownership interest in National Petroleum Refiners of South Africa (Pty) Ltd.’s (Natref) 108,000-b/d refinery in Sasolburg, to London-based Prax Group, but the current operating status and capacity of that refinery has yet to be confirmed by any of the associated parties (OGJ Online, Dec. 1, 2023).
Divestment strategies, refinery restart
The SAPREF JV’s exit from the refining business comes as part of shared strategies by bp and Shell to reduce emissions across operations in line with net-zero 2050 goals.
For bp, the proposed sale complements its own business objectives, as well as those of securing the future of the SAPREF refinery, according to Taelo Mojapelo, bpSA’s chief executive officer.
“SAPREF is an important refinery, the largest in Southern Africa, but continued ownership does not fit with bp’s global strategy. Finding a buyer committed to the future of the refinery was an important consideration for us—we believe CEF is well-placed to take SAPREF forward,” Mojapelo said.
In an earlier related statement posted to its South Africa in-country website on May 10, Shell—which has aggressively furthered its downstream divestments since 2020—confirmed that it plans to sell its entire shareholding in SDSA “[a]s part of [the company’s] commitment to simplification, performance, and discipline" (OGJ Online, May 8, 2024).
CEF has yet to reveal further details regarding a timeline for restarting the SAPREF refinery.
Robert Brelsford | Downstream Editor
Robert Brelsford joined Oil & Gas Journal in October 2013 as downstream technology editor after 8 years as a crude oil price and news reporter on spot crude transactions at the US Gulf Coast, West Coast, Canadian, and Latin American markets. He holds a BA (2000) in English from Rice University and an MS (2003) in education and social policy from Northwestern University.
