Sinopec, one of Chinas largest state-owned companies, has undertaken to invest US$480mn in South Africa to upgrade and modernise Chevron South Africa’s Cape Town-based oil refinery
This undertaking is part of a comprehensive agreement with the company on public interest issues, as announced by Ebrahim Patel, minister of economic development.
Chevron's South African assets include an oil-refinery in Cape Town with a capacity of 100,000 bpd, a lubricants blending plant in Durban, storage tanks and distribution facilities as well as about 850 fuel service stations trading under the Caltex brand.
According to Chevron, Sinopec made an offer to buy the company's local assets for US$900mn.
The commitment by Sinopec to invest in the refinery capacity is expected to enhance and increase effective output of locally-refined oil products and improve health and safety standards in the refinery operation.
“The agreement also provides for Sinopec to increase the level of BEE ownership in the local company from 25 per cent to 29 per cent, 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,” according to Patel.
Sinopec has also committed to maintain a large presence of locally-owned and operated service stations in South Africa, aiming to allow a broad-based South African benefit from the presence of the oil-major in the local economy.
The company is further expected to set up a development fund of US$15mn to promote economic development in South Africa, particularly small businesses, black-owned companies and localisation efforts.
In addition, it is further set to increase the level of LPG and procure non-oil products locally wherever feasible. This is in line with South African government's focus on local industrialisation and the expansion of manufacturing and local productive services.
“Job creation and improved investment in South Africa are critical as are deeper and bolder economic inclusion measures. We look to the oil industry as a whole to do more on all these metrics. We will also engage with the current minority shareholders to secure similar undertakings on jobs, investment, procurement and empowerment,” Patel concluded.
