PetroSA Looks Into Entering SA Retail Market

PetroSA has been talking to local oil companies with a view to entering the local petroleum retail and distribution market. PetroSA, the national oil and gas company, has been talking to local oil companies with a view to entering the local petroleum retail and distribution market and could conclude an agreement by the end of this financial year, say existing and former senior officials.

Entry into the South African petroleum retail and distribution market is a big shift in the company’s strategy. PetroSA has steered clear of the local retail and distribution market even though it owns a 36000-barrels-a-day gas-to-liquids refinery in Mossel Bay. Presently, refined petroleum products from the refinery are sold through the retail network of various oil companies.

The talks with local oil companies could see PetroSA acquire some of the assets that established oil companies might sell. Shell and BP are already selling some of their assets in several African countries. PetroSA’s assertions add to speculation that it has been in talks with Shell and BP regarding South African Petroleum Refineries’ (Sapref’s) refinery in Durban. Shell and BP are the joint owners of the refinery, but none of the companies have confirmed that.

Sipho Mkhize, former PetroSA CEO, and CFO Nkosemntu Nika have said the company has been talking to unnamed local companies about entering the local downstream market. The local downstream market entails the refining of petroleum crude oil and the processing of raw natural gas.

In the 2010 annual report, Mr Nika said: “In the period under review, the company continued to engage with established downstream market players to identify potential partners that could facilitate and serve as a springboard to PetroSA’s entry into the downstream petroleum industry scene”.

Mr Nika highlighted PetroSA’s planned crude oil refinery in Coega and the acquisition “of a downstream industry stake” among the “mega projects” for which the company was looking for funding.

He said entry into the downstream market would enhance PetroSA’s economic viability. A move towards the downstream market is in line with PetroSA’s Vision 2020 of a fully integrated oil company, supplying at least 25% of SA’s liquid fuel needs by 2020.

In his CEO’s report, Mr Mkhize, who was fired in August , said the decision by oil companies such as Shell and BP to divest from some downstream markets presented PetroSA with opportunities. PetroSA spokesman Thabo Mabaso said the company could not identify companies with which it had been negotiating.

Source: BusinessDay - Thursday, 21 October 2010