The South African petroleum industry was thrown into confusion in March 1997 when Minister of Minerals and Energy Penuell Maduna threatened to “re-regulate the entire industry”.
He accused multinationals operating in South Africa of maintaining a stranglehold on the domestic industry without contributing to black empowerment or the economy as a whole.
Recently, black empowerment companies walked out of the South African Petroleum Industry Association (Sapia) and indicated they would form their own association, the African Mineral and Energy Forum (Amef). With Amef, unions have called on the government to halt deregulation.
Sapia director Colin McClelland believes that deregulation in South Africa will not take place for at least three years: “Pressure on the government by unions and black empowerment companies is far too great for [Maduna] to change the rules at present.”
There is also increasing interest in the South African petroleum market from Saudi Arabia, and large black corporations such as New Africa Investments Limited are looking at the oil industry for opportunities.
Add to this increasing competition between local multinationals and an uncertain political outlook in the local industry, and it seems the phenomenon of globalisation means that companies will have to battle international conglomerates.
Despite this, both Sasol and Engen, the only two listed oil companies in South Africa, could ultimately benefit from local restructuring (even re-regulation), black empowerment and globalisation.
Maduna said in 1997 the government was considering setting up a single company to control its oil interests, a state vehicle to expedite the process of moving local businesses into the South African Development Community. The company would consist of Sasol, Mossgas, the Strategic Fuel Fund, Petronet, Soekor and its 20% stake in Engen.
The International Monetary Fund forecasts that growth in world petroleum consumption will come from developing countries. Engen and Sasol are both positioned to take advantage of this growth.
Sasol has been exploring in Namibia and Algeria and found oil in the Democratic Republic of Congo. It has also established export links with Zambia, Zimbabwe and Congo. Other targets include North and West Africa and Mozambique -the latter in a joint venture with Energy Africa and Philips Petroleum International. Sasol’s share price has risen from R39 in 1997 to R51, and is expected to reach R70 within a year.
Engen’s vehicle into emerging markets is Energy Africa. It plans joint ventures with companies in Asia. Its share price has moved from R18 in 1997 to R21,50, and is expected to reach R26 by year-end.
Despite the problems in the South African petroleum industry, the scene seems set for growth for South African multinationals.