China Petroleum & Chemical Corp. agreed to buy Chevron Corp.’s South African assets for about $900 million as part of its plan to expand in international markets.
China Petroleum will acquire Chevron’s 75 percent stake in a business that includes a 100,000 barrel-a-day refinery in Cape Town and a lubricants-manufacturing facility in Durban, the state-owned Chinese company known as Sinopec said in a statement on Wednesday. The remaining 25 percent will continue to be held by a group of local shareholders.
Sinopec, which has invested $6 billion in downstream businesses in half a dozen countries over the past five years, was selected as the preferred bidder for assets that had generated interest from trading houses such as Vitol Group and Gunvor Group, and France’s Total SA. The acquisition also gives the Chinese company a network of more than 800 service stations in South Africa and Botswana, plus storage tanks and oil depot distribution facilities.
“With this investment, Sinopec looks forward to becoming an integral part of South Africa and Botswana’s local economies,” the company said in a statement.
Chevron put the business up for sale as part of a three-year divestment program announced in 2014. The US. oil producer tried unsuccessfully to block plans for new fuel storage facilities in South Africa as the country introduces more stringent clean-fuel standards, saying it would undermine the profitability of the Cape Town plant. The company estimated it would need to spend $1 billion on upgrading the refinery, built in 1966, to meet the regulations.
“Sinopec intends to enable technological improvements and upgrades for all of the acquired assets to help meet increasing local demand for quality products as well as contribute to the development of the indigenous oil industry,” the Chinese company said.
The transaction is subject to approval by regulatory authorities.
Sinopec was selected “due to the better terms and conditions of their offer” and factors including its longer-term strategy in Africa, Chevron said in an emailed statement.
Sinopec will retain Chevron’s Caltex brand for the retail stations for up to six years before launching a rebranding strategy. The company also said it intends to “maintain the entirety of the local workforce and ensure that the operations and services to customers are uninterrupted during the ownership transition.”