File Image: IOL
JOHANNESBURG - As the race for Chevron’s South African assets heats up, Soihl Hong Kong Holding (Sinopec) has made multibillion- rand commitments, effectively raising the bar for fellow suitor Glencore.

In separate statements, Sinopec and the Department of Economic Developments on Thursday announced that they had agreed on a range of so-called public interest issues relating to employment, black economic empowerment and the development of small- and medium-sized enterprises in South Africa.

The fact that the Department of Economic Development and Sinopec have been in discussions has come as no surprise. Economic Development Minister Ebrahim Patel never lets major deals pass through without substantive commitments to address the country’s industrial and economic priorities.

In the commitments that the Chinese giant has made, the plan to spend R6 billion on Chevron’s 100000 barrels a day refinery stands out.

FILE PHOTO: The Chevron Oil Refinery is seen in Cape Town

That is in addition to the $900million (R11.15billion) that Sinopec agreed to pay for Chevron’s 75percent stake in the assets.

According to Sinopec, the transaction, if it goes through, will be the largest acquisition by a Chinese company of a controlling interest in a major South African company.

In addition to the Cape Town refinery, Chevron’s other assets are a network of approximately 850 service stations, a lubricants blending plant in Durban, storage tanks and oil distribution facilities.

Assets

The Chevron assets have been on the market since January 2016. A number of companies have been associated with the assets. These included Sasol, Puma Energy, Total and Vitol.

In the two years that the assets have been on the market, Chevron has said very little about the search for buyers.

However, speculation has been rife that some of the potential buyers scoffed at the idea of buying the refinery.

And there is a reason for that. South African refineries, including Chevron’s, need multibillion-rand investments.

However, it remains unclear who will foot the bill for the upgrades necessary to switch to cleaner fuels.

- BUSINESS REPORT