Sweet deal: Economic Development Minister Ebrahim Patel says Chinese oil giant Sinopec will use SA as its base to expand its African refining business. Picture: TREVOR SAMSON
Sweet deal: Economic Development Minister Ebrahim Patel says Chinese oil giant Sinopec will use SA as its base to expand its African refining business. Picture: TREVOR SAMSON

China’s largest oil company has agreed to invest R6bn to upgrade and modernise the Chevron refinery in Cape Town if the Chinese company succeeds in its $900m bid to buy control of US oil major Chevron’s business in SA.

The investment, which will enable the refinery to upgrade to new, cleaner fuel requirements, is one of a wide-ranging set of public-interest conditions that Economic Development Minister Ebrahim Patel negotiated with the China Petroleum and Chemical Corporation (Sinopec) in terms of the Competition Act.

The Competition Commission gave the green light to the Sinopec deal, subject to the conditions agreed between Patel and the group, on January 3.

It is understood that global oil trader Glencore, which in October joined up with Chevron SA’s empowerment shareholders for a rival, $973m bid for the local company, would have to match the public interest conditions agreed on with Patel if it wanted to get competition authority approval for its bid.

Glencore said on Thursday there was no change in its position and that it was making good progress in satisfying conditions to complete the transaction.

Patel said on Thursday that the government would not choose to whom Chevron sold control of Chevron SA, "but we will ensure that proper public interest conditions, in line with the Competition Act, should apply to whoever is the successful bidder". In terms of its agreement with the minister, Sinopec will be using SA as its base to expand its African refining and downstream business.

The Chinese company has also undertaken to set up a $15m (about R200m) fund to promote economic development in SA and to increase black economic empowerment ownership of the local company, the petrol filling stations of which trade under the Caltex brand.

No jobs will be lost because of the merger and Sinopec will sell South African products using its network of service stations in China.

"The commitments by Sinopec show a strong appetite by global investors for long-term investment in SA," Patel said on Thursday.

The Sinopec deal, if it goes ahead, will be the largest acquisition by a Chinese company of a controlling stake in a South African business.

Sinopec spokesman Lu Dapeng said on Thursday that SA’s established market, infrastructure facilities, legal environment, human resources and strategic role on the continent would provide a strong platform for the implementation of Sinopec’s globalisation strategy.

Chevron SA’s empowerment shareholders, led by Mashudu Ramano’s African Legend Investments, own the 25% that the US parent does not own and have a pre-emptive right to buy the other 75%, on the same terms as Sinopec.

The Glencore deal would lead to them exercising this right but flip the stake to Glencore, which plans to bring in another, as yet unnamed partner.

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