The state-owned Central Energy Fund (CEF) has announced that it will buy Sapref refinery in Durban from BP and Shell for R1.
Operations at Sapref, owned by bp Southern Africa (bpSA) and Shell Downstream SA, have been on hold for more than two years after the companies announced in February 2022 that they were implementing a spending freeze and holding back operations until a decision was made on the future of the plant.
They said at the time that plans for the plant could include a change of ownership and some reports mentioned that the CEF, which manages the country’s energy assets, had then already expressed an interested in buying the 180,000 barrel-a-day plant.
On Saturday bpSA and Shell Downstream said they had reached an agreement for the sale of their respective 50% ownership assets located at Sapref to the CEF.
Jacky Mashapu, group corporate affairs manager at CEF, confirmed to Business Day on Sunday that the value of the transaction was R1. He said it was too soon to comment on the possibility of restarting operations at the refinery saying that “when the time is right” after the sale had been concluded, CEF will make public statements in relation to its plans.
The sale includes their interests in the Sapref land and other associated assets, which includes tanks, process units, pipelines to and from Sapref to Island View terminal, and the Single Buoy Mooring for crude imports. Single Buoy Mooring has been supplying crude imports to the Natref refinery in Sasolburg which, for much of 2022 and 2023, was the only refinery operating in SA.
According to bpSA, the 48 permanent employees of Sapref who work at the refinery site together with 16 trainees will transfer with the business.
The sale excludes the Sapref holding company, bpSA’s marketing businesses, the Island View terminal operations and lubricants blending and grease manufacturer Blendcor.
“We view this agreement as a positive outcome for bpSA, for the SA fuel industry and for the country as a whole. 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,” said Taelo Mojapelo, CEO of bpSA.
When it was in full operation, Sapref was responsible for 35% of the country’s refinery capacity.
Mineral resources & energy minister Gwede Mantashe said the acquisition of the Sapref assets would “lay a solid foundation” for the CEF to address SA’s challenges in energy security.
“[We] have noted with concern the declining local refining capacity, which resulted in the country becoming a net importer of refined petroleum products,” Mantashe said.
Local refineries have been marked by several closures in recent years. Apart from the operational stop at Sapref in 2022, Petro SA’s Mossel Bay refinery has been shut since December 2020 due to the unavailability of gas feedstock and the Engen Refinery in Durban was shut down after a huge fire in 2021.
The Astron Energy refinery in Cape Town (formerly Caltex) owned by Glencore, was shut after a deadly explosion in 2020 and only restarted operation in 2023.
The industry has been under pressure to comply with rules published by the government in 2021 that lower the sulphur content allowed in diesel. To comply, some refineries would have to upgrade their facilities at costs that might run into billions.
It was announced in December that a UK-based energy company the Prax Group would acquire a 36% stake in the Natref oil refinery, which is owned by Sasol and TotalEnergies. The transaction was for TotalEnergies’ full 36.36% share in Natref.
Sasol said in its 2023 integrated report that upgrades of R9bn-R11bn might be required at Natref to comply with the legislation in sulphur content.
However, to comply with the new regulations, the company said it was considering investing to convert the refinery to a hybrid (crude and biofuels) green facility.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.