Oil & Gas

Shell International is preparing to exit its longstanding presence in South Africa, where it has operated since 1902, by divesting its shares in its retail, transportation, and refining unit. The majority stake of 72% in this unit is held by the energy company, while the remaining 28% is owned by local investment firm Thebe. Although Shell has not yet made an official announcement on its website, reports indicate its intention to maintain the operational capabilities of its downstream company, Shell Downstream SA (SDSA).

The downstream assets of Shell in South Africa encompass investments in approximately 500 to 600 petrol stations, marking the culmination of nearly 122 years of effort in the country. These assets also include the Sapref refinery, a joint venture with British oil company BP, which produces 180,000 barrels per day and contributes about 35% of the country's refining needs. However, the refinery has been out of operation since 2022, following damage from floods and adverse weather conditions.

Shell's decision to phase out 1,000 petrol stations is part of its strategic focus on energy transition and electric vehicle charging. The company has faced legal disputes with environmental activists over its exploration activities in South Africa's offshore areas, raising doubts about the viability of its assets in the country. Additionally, the South African government's requirements for refineries to produce low-sulfur fuel have added pressure to Shell's operations, as the technology of its refinery units may not meet these specifications.

There is a potential conflict between Shell and its local partner, Thep Investments, which emerged in 2022 when Thep Investments indicated its desire to withdraw and relinquish its 28% stake. The stake, valued at 3.7 billion South African rand (over $200 million), was not subject to discussions about its sale until Shell's unexpected decision to divest. Moreover, upstream exploration activities have been disrupted, with seismic surveys of its license off the east coast facing legal challenges. A South African court ruled in favor of environmental activists and marine enthusiasts, accusing Shell of irregularities in its exploration rights procedures.