Shell’s unwanted South African fuel forecourts have been snapped up by Abu Dhabi energy business Adnoc Distribution, incidentally one of the foreign companies present at Cyril Ramaphosa’s investment jamboree earlier this year.
Now the group has inked a $1bn deal to buy Shell’s downstream fuel distribution business, which has been up for sale since 2024, as part of a global rejig for the energy giant.
But for locals at any of the 580 Shell sites countrywide, there’ll be zero change – for now, that is.
“What customers will notice in the beginning is actually … nothing,” Adnoc’s chief operating officer Klaas Mantel tells Currency. That’s because Adnoc is planning to keep the Shell brand, given its strength and longevity.
Push and pull
South Africa’s downstream fuel sector has been nothing if not dynamic these past five years. Does the number of new names signify a desirable sector, or the exact opposite?
“What you see here is push and pull: some of the players wanted out, so assets were available and what you see is that the buyers are coming in two times: there are traders [like Vitol which bought Engen from Petronas, and Glencore which now owns Astron, formerly Caltex], but we’re very different: we’re a retailer; we bought this for the retail asset as opposed to a marketing short, in the jargon, for a trading operation,” says Mantel.
That’s not to say Adnoc won’t benefit from having a sister business involved in fuel trading (Adnoc Global Trading), and may explain why the company isn’t worried about fuel supply, notwithstanding South Africa’s dwindling refinery capacity.
“The market has become an import market, but from a security of supply point of view that doesn’t have to be a problem,” says Mantel.
“We don’t expect any issues on the fuel supply side, but the country has constrained logistics so we’ll be looking at how we can team up with the government, how can we ensure that our customers will always have security of supply.”
The former Shell executive is also undeterred by the country’s sluggish economic growth of the past 15 years.
“We’re looking at the prospects of the country and we’re optimistic. The recent past hasn’t been fantastic, I guess, but we’re positive about the future. The driving public is increasing, car ownership is still relatively low at 11-million cars for 65-million people, so we see a lot of upside in the country overall but especially in mobility,” he says.
‘Big commitment’
Still, it’s “a big commitment” in Mantel’s telling, and only the fourth country into which the company is expanding, after Abu Dhabi, Egypt and Saudi Arabia.
But the group, which is listed on the Abu Dhabi Securities Exchange, expects the purchase to be immediately earnings accretive – an increase of 6% to earnings per share in the first full year after completion – and says it will generate an internal rate of return in excess of the firm’s hurdle rate, which Mantel puts at double digits.
This is not Mantel’s first rodeo in South Africa; as part of Shell’s Africa team he lived in the country from 2004 to 2012, and was involved with the Shell empire until he left in 2020 to join Adnoc Distribution in 2023.
Now in its 52nd year, the group owns 1,032 service stations, 568 in the United Arab Emirates, 219 in Saudi Arabia and 245 in Egypt.
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Top image: supplied.
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