Sinopec extends R6bn investment for Chevron’s SA refinery
SINOPEC, one of China’s largest state-owned companies, has undertaken to invest R6 billion in South Africa to upgrade and modernise the Cape Town-based oil refinery owned by Chevron South Africa, a subsidiary of US company Chevron, if it succeeds in its bid to acquire control of Chevron South Africa, and to use South Africa as its base to expand its African refining and downstream businesses.
This undertaking is part of a comprehensive agreement with the company on public interest issues, announced yesterday by Ebrahim Patel, Minister of Economic Development.
Chevron’s South African assets include an oil-refinery in Cape Town with a name-plate capacity of 100 000 barrels a day, a lubricants blending plant in Durban, storage tanks and distribution facilities as well as about 850 fuel service stations trading under the Caltex brand.
The company employs about 1 200 workers directly and it reports that it supports about 56 000 jobs indirectly. Sinopec made an offer to buy the company’s local assets for $900 million (R11.17bn).
The commitment by Sinopec to invest in the refinery capacity will enhance and increase effective output of locally-refined oil products.
“The agreement also provides for Sinopec to increase the level of BEE ownership in the local company from 25 percent to 29 percent, which will include an employee ownership component. The Chinese investor committed to ensure that no jobs are lost as a result of the merger and that the company will retain at least its current aggregate level of employment for a five-year period,” Minister Patel said.
One of the more innovative terms of the agreement provides for Sinopec, which has a large petrol service-station network in China, to use that retail network at service stations to support the export and sale of South African manufactured products to China.
The terms of the agreement with the Economic Development Department addresses the public interest conditions that will be proposed to the Competition Tribunal for inclusion in any regulatory approval of the proposed transaction.
The transaction itself is subject to such regulatory approval and finalisation of the exercise of a Right of First Refusal invoked by the current minority shareholders.