With the competition authorities rejecting a tie-up between privately owned Sasol and Engen, owned by Malaysia’s Petronas, there are signs that the state-owned PetroSA may be getting ready to grow muscles in the domestic market.
Senior PetroSA and government officials met Petronas in Kuala Lumpur, Malaysia, last month, leading to speculation that PetroSA may be bidding for part of, or the whole of Petronas’s interest in Engen.
It is unclear if a potential deal could be for part of or the whole of the Petronas stake, but it is likely that PetroSA will include an empowerment partner, should a deal go ahead.
It raises the prospect of market leader Sasol facing increased competition from a state-owned entity.
PetroSA’s website says the company plans to diversify into petroleum activities including wholesale and retail marketing.
Petronas owns 80% of Engen, the other 20% being held by Worldwide African Investment Holdings, which has SAA chief Khaya Ngqula and MTN chief Phuthuma Nhleko as its lead investors.
A Petronas official in South Africa told the Mail & Guardian negotiations were at the “beginning stages” and that Petronas South Africa’s general manager, Azrin Azmi, “may not be ready to comment at this stage”.
Azmi said he was not aware of any talks and referred inquiries to the Petronas head office in Malaysia.
Last week Worldwide African Investment Holdings, the empowerment partner for Petronas in Engen, indicated that it was in talks with Petronas to increase its shareholding.
Worldwide MD Zellah Fuphe told Business Report that it wanted to increase its shareholding to the maximum permissible.
Petronas said it remains committed to its investment in South Africa and that it would continue to engage with stakeholders to ensure that Engen achieves the targets of the South African liquid fuels black economic empowerment charter.
Former minister of minerals and energy Lindiwe Hendricks indicated a larger role for PetroSA in her budget speech in May this year.
She said: “It will therefore become necessary for us to consider changes to the entire petroleum and gas value chains, which includes refineries, pipelines, wholesaling, distribution and retailing … This value chain cuts across both public and private sector organisations, with PetroSA, the state-owned national petrochemical company, expected to play a critical role.”
One industry player, who spoke on background, said that Petronas is currently talking to a number of parties about a potential deal following the failure of the Uhambo merger.
Another said that it was believed that Petronas would exit the South African market if it got the right price for its investment in Engen.
PetroSA CEO Sipho Mkhize recently travelled to Malaysia to meet Petronas alongside the Director General of the Department of Minerals and Energy, Sandile Nogxina.
Mkhize has denied that the trip involved any discussions of a possible deal with Petronas. He claimed he was there to attend the Asian oil and gas conference and to take part in discussions between the minerals and energy department and Petronas regarding a scholarship programme in South Africa, sponsored by Petronas.
Nhlanhla Gumede, the Department of Minerals and Energy’s chief director of hydrocarbons, said he had attended these meetings to discuss the scholarship programme with Nogxina and Mkhize.
“The Malaysians are sponsoring a scholarship programme for students in South Africa and there was a coordination meeting in Malaysia,” said Gumede.
He said that in the past five years most of the graduates from the programme had gone to work at -PetroSA, so Mkhize’s role in these meetings was about aligning -PetroSA’s needs with what Petronas was offering.
The Competition Tribunal’s decision earlier this year refused the merger between Sasol, the largest local player in fuel production, and Engen, the largest player in the downstream retail market.
The joint venture, Uhambo, would have had a 39,9% inland retail market share, more than double its closest competitor TotalSA, which has a 16,4% inland market share.
PetroSA’s principal investment is in the Mossgas plant, which is running short of its captive gas supplies at Mossel Bay. It also stores crude oil on behalf of the Strategic Fuel Fund.
It has announced exploration deals in a number of African countries, including Nigeria, Sudan and Gabon.