Shell’s winding down of SA operations part of global transition strategy
Shell’s winding down of SA operations part of global transition strategy
SHELL South Africa yesterday said the global company had undertaken a comprehensive review of the downstream and renewables businesses across all regions and markets in line with its focus on performance, discipline, and simplification.
In response to a Business Report enquiry yesterday, Shell SA spokesperson Pam Ntaka said the multinational oil producer had decided to reshape its downstream portfolio and intended to divest shareholding in Shell Downstream South Africa (SDSA) as a result of this review.
“Considering SDSA’s illustrious history, this decision was not taken lightly,” Ntaka said.
“We have made a significant contribution to nation building by powering lives through our products and services, our people, promoting equity and inclusion, and making a positive impact on society through our social investment programmes. We have also built one of South Africa’s most recognisable and loved brands.”
Ntaka said that during the divestment process, they would work to preserve SDSA’s operating capabilities, maintain the Shell brand presence, and secure the best possible outcome for their people and customers in South Africa under new ownership.
Rod Crompton, a visiting adjunct professor at the African Energy Leadership Centre of Wits Business School, said Shell’s recent undertaking was more likely a head office global strategy decision to move out of less profitable businesses (the downstream service stations), especially in more risky countries like South Africa and instead to focus on the more profitable upstream (oil and gas exploration and mining of oil and gas) business.
Crompton said he expected Shell would sell its retail assets to another large player, just as Caltex and Engen (Petronas) did.
He said the purchasers of Caltex (Glencore) and Engen (Vitol) were large international trading companies.
“And if Shell goes the same way, now would be a very good time for government to implement its 1998 policy White Paper of deregulating the petrol price,” Crompton said.
“The policy’s intent of price regulation was to keep refineries in South Africa. That has clearly failed with the closure of the Enref, Sapref and PetroSA refineries. There now even less reason to continue regulating the petrol price.
“Instead, policy should be driving at getting the keenest possible prices for motorists and the economy.”
Crompton said Total was the only multinational oil company left with significant operations in the country, and it could easily follow the others that have left.
In March, Shell published its first energy transition update since the launch of its Powering Progress strategy in 2021.
This followed its outlining of how their strategy delivered more value with less emissions, emphasising the “more value” part at its Capital Markets Day in June last year.
In this Energy Transition Update 2024, Shell focused on how the same strategy delivered less emissions.
“Our target to achieve net-zero emissions by 2050 across all our operations and energy products is transforming our business,” it said.
“We believe this target supports the more ambitious goal of the Paris Agreement to limit global warming to 1.5°C above pre-industrial levels.
“Shell’s strategy supports a balanced and orderly transition away from fossil fuels to low-carbon energy solutions to maintain secure and affordable energy supplies.”
At the time, the company said its energy transition plans covered all it businesses.
It said liquefied natural gas (LNG) was a critical fuel in the energy transition, and they were growing their world-leading LNG business with lower carbon intensity.
“As one of the world’s largest energy traders, we can connect the supply of low-carbon energy to demand, as we have done for many years with oil and gas.”
BUSINESS REPORT