South Africa May Limit Shell's Drilling Licenses After Its Downstream Exit

South Africa has hinted that Shell could receive fewer oil exploration licenses after the supermajor decided to sell its downstream business in the country, Mineral Resources and Energy Minister Gwede Mantashe told Bloomberg in an interview published on Friday.

Earlier this week, Shell said it is preparing to divest from downstream operations in South Africa as a result of an internal portfolio review.

Shell holds a majority share in Shell Downstream SA (SDSA), which was formed by the merger agreement between Shell South Africa and Thebe Investment Corporation a decade ago. The partnership was intended to merge Shell’s marketing and refining business, with Thebe, a black empowerment group, holding a 28% stake in the downstream business, as reported by Reuters.

According to the Daily Maverick, Shell and Thebe Investments are still in heated debate over the value of Thebe's stake in the project.

“Shell has decided to reshape the Downstream portfolio and intends to divest our shareholding in Shell Downstream South Africa (SDSA),” the oil giant said in a statement in response to Daily Maverick’s queries, adding that the decision followed a full review of “… the Downstream and Renewables businesses across all regions and markets in line with Shell’s focus on performance, discipline, and simplification”.

Following this announcement, South Africa’s Energy Minister Gwede Mantashe told Bloomberg “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.”

Shell has relinquished some licenses offshore South Africa amid regulatory uncertainty as the country hasn’t finalized yet a draft Upstream Petroleum Resources Development Bill.

Analysts believe that some offshore formations that South Africa shares with the offshore areas of Namibia – the latest deepwater exploration hotspot – could hold great resource potential.

Shell and TotalEnergies have already made large discoveries offshore Namibia, kicking off the Namibian oil rush in 2022.  

By Charles Kennedy for Oilprice.com

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