South African motorists can expect significant changes in the country’s fuel station market over the coming years, according to media network 'My Broadband ZA.
The most recent development was Dutch-Swiss oil giant Vitol Energy’s subsidiary, Vivo Energy, finalising its acquisition of 100% of Engen stations in South Africa.
The company announced the transaction’s completion shortly after the Competition Tribunal approved Vivo Energy’s purchase of Malaysian firm Petronas’s 74% stake in Engen.
Engen has over 1,300 local service stations in South Africa, making it the country’s biggest fuel distributor. Vivo Energy has over 2,600 stations across 27 other African countries. These stations operate either under the Engen or Shell brands.
Following the acquisition, Vivo Energy will have a vast network of 3,900 stations over more than half of Africa’s countries. One major benefit of the takeover for Engen will be access to a significantly larger international fuel distribution network.
As part of the transaction’s conditions, Vitol committed to investing R9.85 billion in South Africa’s retail and fuel infrastructure and solar energy generation over the next five years.
It has also committed to continue buying fuel from Astron’s oil refinery in the Western Cape for 15 years and Sasol and the TotalEnergies Natref refinery in the Free State for ten years.
Vivo Energy said it would only make changes that “add value” and keep a “business as usual” approach for customers, partners, suppliers, and employees.
One thing that is certain is that Engen’s name is going nowhere.
The same cannot be said for Caltex. Its white bunny is set to disappear as all its stations in South Africa and Botswana are being rebranded to Astron Energy, a subsidiary of Glencore.
The rebranding was announced in August 2021 and came three years after Glencore acquired the majority of the former Chevron South Africa, which owned the Caltex brand. Astron continued to operate roughly 800 stations under the Caltex brand as part of a licence agreement.
Changes could also be on the cards for Shell-branded fuel stations.
The British multinational oil company is exiting its retail, transport, and refining operations in South Africa. The news caused a panic over potential job losses at the company’s 600 service stations.
However, Liquid Fuels Wholesalers Association of South Africa’s CEO Peter Morgan said that Shell would likely retain a small shareholding of the retail business through a smaller sub-brand Viva Energy. This brand is not to be confused with Viva Oil, owned by the Royal Energy Group, a South African fuel wholesaler.
Given that Viva Energy operates fuel stations under the Shell brand, the familiar yellow and red stations seem likely to stick around.
At a global level, Big Oil — companies like ExxonMobil, Chevron, Shell, BP, and Total — have been pulling back from downstream operations like retail and distribution and focused on upstream activities like extraction and exploration, which provide better returns to investors.
Fuel retail in Africa, in particular, tends to operate on very slim margins, with high costs and associated risks.
One factor that could reduce returns even further in downstream operations is the growing adoption of new energy vehicles that are either more fuel efficient, like hybrids, or don’t use any fuel, like fully electric cars.
Vivo Energy has been piloting electric vehicle (EV) charging infrastructure in several markets, including Mauritius, Moroccos, and Reunion.
Several of its Engen stations in South Africa also have GridCars or Rubicon fast chargers available.
However, the company believes that there will still be a high demand for oil in African countries, where the electric transition is behind and expected to be slow.
While fuel demand is expected to slow in developed countries — particularly in Europe — Citac Africa analysts expect fuel sales in Africa to grow by more than a fifth by 2030.
Another trend to keep an eye on is South Africa’s increased reliance on petrol and diesel imports, which experts fear could cause a surge in prices at the pumps.
The country has just two oil refineries remaining, with less than half the crude throughput capacity it had in 2020.
Engen closed its own refinery in Wentworth, KwaZulu-Natal, in December 2020 following an explosion.
That was followed by BP and Shell-owned SAPREF ceasing their refining operations in 2022, following stricter fuel specifications introduced by the government.
Original article Fuel station shake-up in South Africa (mybroadband.co.za)
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