South Africa signals fewer oil permits for Shell

In a bold move, South Africa’s energy ministry hinted at reducing oil exploration permits for Shell Plc due to the company’s exit from the nation’s fuel-supply sector. Shell’s decision to sell its stake in Shell Downstream South Africa, including 600 gas stations, has sparked discussions about the future of energy partnerships and geopolitical dynamics. With legislative uncertainties and environmental concerns adding complexity, the country’s energy landscape is evolving, signaling potential shifts in strategic alliances and regulatory frameworks.

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By S’thembile Cele

South Africa’s energy ministry signaled it may grant fewer oil exploration permits to Shell Plc over the company’s plans to exit the nation’s fuel-supply business.

The oil major is selling its shareholding in Shell Downstream South Africa, which includes a network of 600 gas stations across the country, following a review of its business across regions and markets. Mineral Resources and Energy Minister Gwede Mantashe said he’s requested a meeting with Shell officials to discuss the matter.

Gwede Mantashe, South Africa’s mineral resources and energy minister.

“They still want to stay upstream, so what we should be doing, we should be more reluctant to grant licenses and permits, at that level, to Shell,” Mantashe said in an interview Thursday on the sidelines of an election campaign event in Richards Bay.

Shell’s oil-exploration business has faced multiple challenges in South Africa, where the company has relinquished licenses over legislative uncertainty. The nation’s Upstream Petroleum Resources Development Bill has yet to be finalized after a process that’s dragged on for years. Environmental groups have also blocked exploration for hydrocarbons in South African waters through legal action.

Shell has been considering quitting a significant part of South Africa’s fuel supply business since at least 2021, when together with BP Plc it began evaluating the possible sale of their 180,000 barrel-a-day Sapref refinery — the nation’s largest crude-processing facility. The plant was shut the following year and the government began considering potentially taking it over.

The company will “work to preserve the Shell-branded service stations under new ownership via brand licensing agreement,” it said in an emailed response to a request for comment. It declined to comment on the minister’s remarks.

Mantashe suggested geopolitical factors may be at play in the exit of western companies. The minister cited South Africa’s successful lawsuit against Israel’s war on Hamas at the International Court of Justice earlier this year, which “doesn’t make the European Union happy with us,” he said. 

“The terms of engagement with Shell will be based on our national interests,” Mantashe said.

The minister said he plans to discuss with Shell a reported impasse with local equity partner Thebe Investment Corp., which has a 28% stake in Shell’s downstream business. The South African company is in a dispute with Shell over the value of the stake, Johannesburg-based news website Daily Maverick reported on May 8.

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