Chevron bid: Fuel Fund in hot water

The Strategic Fuel Fund made an offer for Chevron’s SA assets without the permission of Energy Minister Tina Joemat-Pettersson.

Johannesburg - The Strategic Fuel Fund (SFF), the guardian of South Africa’s strategic fuel stocks, had made an offer for US oil company Chevron’s South African assets without obtaining the permission of Energy Minister Tina Joemat-Pettersson, the Department of Energy said yesterday.

Read also: Fuel Fund not cleared to buy Chevron

The SFF on Wednesday said it had made an offer for Chevron’s assets, which include a national network of Caltex service stations, a 110 000 barrels-a-day refinery in Cape Town and a lubricants manufacturing plant in Durban.

The fund said it had decided to make the offer for the Chevron assets, “given the strategically important role that (they) play in South African job creation, liquid fuels production and their national financial impact, and given the SFF mandate to ensure security of supply of liquid fuels.”

But, in a new twist to the SFF’s surprising bid for the Chevron assets, the department, which is SFF’s ultimate shareholder, said yesterday that it noted “with concern” media reports regarding the SFF’s expression of interest in the Chevron assets, “and is disturbed at the complete disregard for governance processes by the entity in question”.

In a blunt and hard-hitting statement, the department said: “An offer to purchase by an entity of the Department of Energy requires express consent from the minister of energy as the ultimate shareholder representative. This was neither sought nor obtained.”

It said, in view of SFF’s failure to observe the correct processes, Joemat-Pettersson and the department’s director-general, Thabane Zulu, would initiate a thorough investigation into the matter in consultation with both the boards of (the Central Energy Fund) and the SFF.

The SFF is part of a group of companies belonging to the government-owned Central Energy Fund (CEF). Other CEF companies include national oil company PetroSA and African Exploration Mining and Finance Corporation, the state-owned mining company. The SFF was established in 1964 as a Section 21 company and manages South Africa’s crude oil stocks.

SFF chief executive Sibusiso Gamede yesterday declined to comment on the statement “at this stage”.

Bloomberg reported yesterday that Sasol said it was “assessing the opportunity” of making an offer for Chevron’s assets in the region.

“Sasol is working with Chevron and its advisers in this regard,” said Alex Anderson, a Sasol spokesman.

Sasol’s interest in what represents about a fifth of South Africa’s oil-refining capacity comes as the company implements programmes to save R75 billion.

The SFF’s pursuit of the Chevron assets raises questions about the role of PetroSA, given the national oil company’s long-standing desire to get into downstream activities, which include the marketing and distribution of refined petroleum products.

Gamede on Wednesday downplayed the possibility of a clash in PetroSA and the SFF’s roles. He said the SFF would bring along the other CEF companies in the deal. He described the possible acquisition of the assets as a strategic move. He said it was important for the government to own the assets, especially the refinery, in order to ensure security of supply.

He said the SFF had an existing relationship with Chevron as the company’s depot in Milnerton in Cape Town received crude through a pipeline, owned and operated by Chevron, from Cape Town port.

In its statement, the SFF formally expressed its interest in the assets shortly after Chevron announced the decision to divest from South Africa, implying that it had been pursuing the deal for about five months. Chevron put a “for sale” sign on the South African business in January.

Chevron Global Energy, which is handling the search for a buyer for the assets, declined to comment yesterday on the SFF’s offer.

In a statement yesterday, the energy multinational said: “We have communicated earlier that it will be a lengthy process.”

It said that as a matter of policy, it did “does not disclose details of commercial activities, and has no further comment”.

Chevron also would not comment on whether there were any other suitors for the South African assets.

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