Sinopec: South Africa Gives Conditional Approval for Chevron Assets

 

State-owned Sinopec is competing for the assets with commodities trader and miner Glencore (GLCNF), which swooped in last October with a $973 million bid following delays to Sinopec's original agreement.

Asia's largest refiner said in a statement that South Africa's Competition Commission had recommended transaction with Sinopec be approved with certain conditions.

"As part of the approval process, Sinopec has engaged in substantive and constructive discussions with the Economic Development Department to ensure that its strategy in South Africa is aligned with the EDD's policy on industrial and economic development," Sinopec said.

Chevron has a 75 percent stake in the assets, which include a 100,000 barrel-per-day oil refinery in Cape Town, a lubricants plant in Durban and 820 petrol stations and other oil storage facilities. It also includes 220 convenience stores across South Africa and Botswana.
Glencore stepped in after local shareholders, who hold the remaining 25 percent, exercised pre-emption rights following delays to the Sinopec deal.

"Sinopec was thrown into a confusion after local shareholders exercised preemptive rights ... but then the company was advised by the government to proceed with regulatory procedures," said a Beijing-based source with direct knowledge of the matter.

A final decision from the Competition Tribunal was expected in March or April, the source said.

Sinopec has given additional commitments to the government, including investments over five years post acquisition to upgrade the Cape Town refinery into a world-class plant.

The Chinese firm also pledged to develop the fuel marketing business by introducing small and black-owned business as fuel retailers.

"The South African competition committee was convinced that Sinopec has the solid industry expertise equipped with state-of-art refining technology, as well as financial power," said the source.

Sinopec said it will also establish a development fund targetted at small and black-owned businesses thus increasing the level of local procurement of goods and services.

Glencore's bid was aimed at securing the trader its first refining asset since it ventured into downstream investments.

The remaining 25 percent stake will stay with a consortium of Black Economic Empowerment shareholders and an employee trust.

Winning the deal would mark a second major refinery investment for Sinopec as the state oil major looks to expand overseas amid a saturated domestic market. Sinopec owns a stake in the Yanbu refinery in Saudi Arabia controlled by Saudi Aramco.