The exit of Shell from its downstream business in SA should not come as a big surprise. It has been years in the making.
Rivals Caltex and Engen made similar moves, without attracting as much attention. The bottom line is that Shell’s imminent exit from its downstream business is not a big blow for SA, neither for the economy nor jobs.
Its decision is purely a portfolio management decision. The low margins retail business is not what pays the bills in London, where Shell has its headquarters. The retail business, which houses forecourts has never been as profitable as the other kinds of businesses in which Shell is involved, particularly its upstream activities.
However, the decision means Shell is left exposed in SA. It seems to be putting its eggs in one basket — the potentially lucrative hunt for oil and gas off SA’s Wild Coast, a venture that was met with resistance from environmental groups. A high court in SA in 2022 stopped Shell from conducting seismic blasting along the ecologically sensitive Wild Coast region in the Eastern Cape.
The litigants have also made it clear they want the decision by the department of mineral resources & energy, which granted exploration rights to Shell in pursuit of oil and gas in 2014 and renewed it in 2019, to be reviewed.
Shell’s appeal is expected to be heard this year, the outcome of which is likely to determine what will remain of the group in the country. Much is at stake in the dispute, with SA said to be potentially well-endowed with oil and gas.
The Petroleum Agency SA has estimated that the country holds 27-billion barrels and 60-trillion cubic feet of prospective oil and gas resources off the south, west and east coasts.
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