End of Shell petrol stations in South Africa

Abu Dhabi National Oil Company’s retail unit agreed to buy Shell’s fuel stations in South Africa at a $1 billion (R16 billion) enterprise value, giving the Emirati company access to Africa’s biggest economy for the first time.

Adnoc Distribution will gain control of 580 retail stations in the country as well as wholesale fuel, aviation and lubricants operations, it said in a statement Tuesday, confirming an earlier report from Bloomberg News. 

The deal is expected to close next year, after which the company expects to sell 28% of the business to “a local empowerment partner” and distribute employee stock options.

The acquisition is the latest in a wave of M&A that’s made Adnoc and its units among the biggest energy dealmakers in recent years.

Backed by billions of dollars of Abu Dhabi’s oil money, the company has picked up natural gas assets from the US to Africa and Central Asia, and snapped up German chemical firm Covestro AG as it looks to expand its influence around the world.

Adnoc Distribution emerged as the preferred bidder for the Shell portfolio earlier this year after talks with Gunvor Group, one of the world’s biggest independent oil traders, fell through.

For Shell, the sale would be a step forward in its plan to sell non-core holdings as it focuses on assets such as those in Canada in a push to sustain oil and gas production in the long-term.

Adnoc will continue to use the Shell brand for the retail stations and lubricants in South Africa under a long-term brand licensing agreement, according to the statement.

The deal is expected to bolster Adnoc Distribution’s earnings per share by 6% in the first full year after completion, it said.

The sale process, which started in 2024, has progressed despite the conflict in the Middle East, bringing large-scale disruption to Adnoc and other major energy companies in the Middle East. 

Still, Gulf investors have pushed ahead with a string of recent overseas deals, spanning alternative asset managers, private credit and technology platforms.

Last month, two of Abu Dhabi’s biggest wealth funds agreed to commit £1.5 billion ($2 billion) to back private equity firm EQT AB’s acquisition of Intertek Group.

Adnoc’s acquisition of Distribution will further reshape South Africa’s retail fuel market.

Glencore acquired Chevron’s Caltex-branded stations in 2018, while Vitol Group’s Vivo Energy last year bought Engen, the nation’s largest fuel-station chain.

Shell itself sold South Africa’s largest refinery to the state-owned Central Energy Fund after the oil major had stopped processing there in 2022.

Adnoc emerged as the preferred bidder after Shell’s talks with Gunvor — one of the world’s biggest independent oil traders — fell through. An agreement may be reached as early as this quarter, they said.

Shell’s sale of its downstream assets in South Africa makes it the latest oil giant to exit the country in a meaningful way.

In 2024, TotalEnergies, Europe’s largest oil company, announced plans to give up its licence to drill for oil and gas off the shore of South Africa.

The French company spent at least R7.4 billion to find significant oil reserves off the coast of South Africa in 2019, with estimates putting the reserves at around 1 billion barrels of hydrocarbons. 

It experienced further successes in 2020, finding even more reserves of lucrative fossil fuels. However, none of its discoveries has progressed to commercial operation. 

TotalEnergies said it doubts whether the discoveries can be economically viable, given the relatively small demand for fossil fuels in South Africa, where the economy is failing to grow. 

This follows BP’s disposal of its jet fuel business in South Africa and sale of its stake in the Sapref Refinery.

“We view this agreement as a positive outcome for BPSA, South Africa’s fuel industry, and the country as a whole,” said BP South Africa CEO Taelo Mojapelo.

“Sapref is an important refinery, the largest in Southern Africa, but continued ownership does not fit with BP’s global strategy.”

This sale followed BP’s complete cessation of jet fuel operations in South Africa at the beginning of 2023.

Reporting with Bloomberg.