As Shell plans to withdraw its fuel supply operations in South Africa, the South African Department of Energy may reduce the number of oil exploration licences issued to Shell.
The Zhitong Finance App learned that the South African Ministry of Energy said that due to Shell (SHEL.US) plans to withdraw from the fuel supply business in South Africa, the department may reduce the number of oil exploration licenses issued to Shell. After reviewing its global business, Shell is seeking to sell its shares in Shell's downstream South Africa company, which owns around 600 gas stations.
Minister of Mineral Resources and Energy Gwede Mantashe (Gwede Mantashe) has expressed a request for talks with Shell representatives on the matter. Mantash mentioned at an event in Richards Bay that Shell wants to keep its upstream operations in South Africa, but given its decision to exit the downstream market, the Department of Energy may no longer be so willing to grant Shell that level of license.
According to information, Shell's oil exploration business in South Africa faced multiple challenges, including legislative uncertainty, which led the company to relinquish some licenses. South Africa's upstream petroleum resources development bill has not been finalized after years of discussion. Furthermore, environmental organizations have blocked hydrocarbon exploration activities in South African waters through legal channels.
Since 2021, Shell has been considering abandoning some parts of its fuel supply business in South Africa. At the time, Shell and British Petroleum (BP.US) jointly assessed the possibility of selling the 180,000 barrels per day Sapref refinery, the largest crude oil processing facility in South Africa. The plant was closed in 2022, after which the government considered taking over.
In response to a request for comment, Shell said it will endeavour to maintain the operation of Shell branded gas stations in South Africa through a brand license agreement, even if ownership changes. However, Shell did not comment on Minister Mantash's remarks.
Mantash also mentioned that geopolitical factors may be one reason why Western companies chose to leave South Africa. As an example, he said that South Africa successfully litigated the Israeli-Palestinian conflict in the International Court of Justice earlier this year, and this incident may have affected the EU's attitude towards South Africa. Mantash stressed that the terms of cooperation with Shell will be strictly based on South Africa's national interests.
Additionally, Mantash plans to discuss its impasse with local shareholder partner Thebe Investment Corp. with Shell. Thebe Investment Corp. holds 28% of Shell's downstream business.
According to reports, Thebe Investment Corp. and Shell are in disagreement over equity valuation.