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The acquisition of 75% of Chevron SA by Sinopec’s SOIHL Hong Kong is approved

BUSINESS LIVE / 03 JANUARY 2018 - 16:50 / LINDA ENSOR

The Competition Commission has recommended to the Competition Tribunal that the proposed 75% acquisition of Chevron SA (CSA) by Chinese firm SOIHL Hong Kong Holding Limited (SOIHL HK) be approved, with conditions.

SOIHL is a subsidiary of the state-owned China Petroleum and Chemical Corporation (Sinopec), which is a significant Chinese manufacturer and supplier of petroleum and petrochemical products.

Chevron. Picture: REUTERS/MIKE BLAKE

It claims to be the largest oil and petrochemical products supplier, and the second major oil and gas producer, in China. Sinopec is also the largest oil refiner and the second largest chemical company in the world, and is second in respect of the total number of petrol stations in the world.

SOIHL will be a new entrant into the South African petroleum market.

CSA is 75% owned and controlled by US firm, Chevron Global Energy, and ultimately controlled by Chevron Corporation.

CSA operates at a retail level in SA under the Caltex brand and is active in refining and producing petroleum products at its Cape Town refinery and lubricants blending plant in Durban. It is also involved in marketing and distributing petroleum products, competing with companies such as Engen, BP, Shell, Total and Sasol.

"The proposed transaction is unlikely to substantially prevent or lessen competition in any of the identified markets. However, to alleviate any possible loss of employment post-merger, as well as any potential impact on CSA’s retired employees, and in respect of other public interest issues raised by the Department of Economic Development, the commission recommends that conditions be imposed which address the identified public interest concerns," the commission said in a statement on Wednesday.

Sinopec has agreed to establish an office in SA to co-ordinate and oversee its midstream and downstream operations in the country, and to use SA as the platform to oversee operations in the rest of Africa.

In addition, Sinopec has agreed that no employees will be retrenched as a result of the merger. Other commitments relate to investing in the Cape Town refinery with a view to creating a world-class facility. Sinopec also made undertakings in respect of CSA’s wholesale and retail chains; by-products and logistics; local procurement; exportation of locally manufactured products; and broad-based black economic empowerment.

Where new independently owned petrol stations are to be established, CSA will give preference to small businesses, especially black-owned ones

"Sinopec will make a significant investment [in the Cape Town refinery] over and above the current investment plans of CSA. Sinopec will also upgrade CSA’s operations in line with the standards of its other refining operations, as well as expanding the refinery capacity in SA, over time," the commission said.

Additionally, Sinopec committed to maintaining CSA’s current baseline number of independently owned petrol stations. Furthermore, where new independently owned petrol stations are to be established, CSA will give preference to small businesses, especially black-owned ones.

Sinopec has also undertaken that, when establishing new, retailer-owned petrol stations, CSA will favour small businesses, and will increase its level of supplies of liquid petroleum gas to black-owned businesses, following the expiration of current contractual arrangements.

"In addition, Sinopec undertakes to promote the export and sale of South African-manufactured products for sale in China and, in particular, through the service station network operated by Sinopec in China. Sinopec has made further commitments regarding the rebranding of Caltex into Sinopec."

With regards to the branded marketers [Caltex’s independent wholesalers and distributors of its petroleum products], Sinopec has undertaken to ensure CSA will not change any of the existing contracts with them that would be to their detriment.

A development fund will be created that will focus on the development of small businesses and black-owned businesses that contribute to CSA’s value chain, through both financial and technical support, as well as training.

Sinopec agreed to maintain or increase CSA’s current level (as a proportion) of expenditure on local procurement of goods and service. It will also ensure CSA will not substitute current local and South African-owned suppliers with off-shore suppliers of goods or services.

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LINK : https://www.businesslive.co.za/bd/companies/2018-01-03-the-acquisition-of-75-of-chevron-sa-by-sinopecs-soihl-hong-kong-is-approved/

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