Shell has confirmed that it will be exiting South Africa, concluding its longstanding presence that spans over 120 years.
Shell could exit South Africa after more than 120 years
The oil giant announced on Monday that it intends to divest its majority shareholding in Shell Downstream South Africa (SDSA).
This move is part of a comprehensive review of Shell’s operations worldwide, with a focus on enhancing efficiency and aligning more closely with its long-term strategic goals.
The downstream unit in South Africa, which includes approximately 700 fuel service stations, has been significantly impacted by the closure of the Sapref refinery—a joint venture with BP—in 2022 after it suffered extensive flood damage.
Shell stated:
“As a result of this review, Shell has decided to reshape the downstream portfolio and intends to divest our shareholding in SDSA. Considering SDSA’s illustrious history, this decision was not taken lightly.”
This move showcases a shift in the company’s focus towards more sustainable and renewable energy sources, as well as a realignment of its global operations.
What are the implications of Shell’s exit from SA?
Shell’s exit from South Africa is significant, given its historical and economic impact on the region.
For over a century, Shell has been a major player in South Africa’s energy sector, contributing to national development, employment, and corporate social responsibility initiatives.
The divestment could lead to changes in market dynamics, potential job reallocations, and shifts in the energy supply chain within the country.
The company has expressed commitment to ensuring a smooth transition that preserves SDSA’s operational capabilities and secures favourable outcomes for its employees and customers.
Shell aims to maintain its brand presence in South Africa and ensure continuity of service during the transition to new ownership.
Shell quarterly performance in Q1:2024
In the first quarter of 2024, Shell reported robust financial and operational performance.
Adjusted earnings increased to $7.7 billion from $7.3 billion in the previous quarter, with a Cash Flow From Operations (CFFO) of $13.3 billion.
This performance was achieved despite a $2.8 billion outflow related to working capital adjustments due to higher crude and oil product prices at the quarter’s end.
Performance by segment showed resilience and strategic adaptation:
- Integrated Gas: Earned $3.68 billion, supported by higher realised gas prices and production volumes.
- Upstream: Generated $1.933 billion, despite challenges such as increased well write-offs.
- Marketing: Maintained steady earnings of $781 million, with higher lubricant margins balancing lower mobility volumes.
- Chemicals & Products: Mixed results with some losses, although refinery utilisation improved.
- Renewables & Energy Solutions: Stable earnings of $163 million, reflecting growth in power sales and renewable capacity.