PetroSA Said to Consider Buying Petronas’ Stake in Engen

PetroSA Said to Study Buying Petronas’s Controlling Engen Stake
An employee re-fills the storage tanks with fuel at an Engen Ltd. gas station in Johannesburg. Photographer: Nadine Hutton/Bloomberg

July 17 (Bloomberg) -- PetroSA, South Africa’s state-owned oil company, is considering buying a controlling stake in fuel retailer Engen from Malaysia’s government, according to two people with knowledge of an announcement made to Engen staff.

PetroSA will conduct due diligence for three to six months before deciding on the purchase, the people said, citing Engen CEO Ahmad Nizam Salleh, who addressed employees July 15. The people asked not to be identified as the talks are private. Malaysian state company Petroliam Nasional Bhd. holds 80 percent of Cape Town-based Engen and Pembani Group Ltd. owns the rest.

“PetroSA has over the last couple of years indicated a willingness to look for downstream opportunities,” the oil company said in an e-mailed response to questions. “We have over this period been engaged in a series of negotiations with various potential partners,” it said, without elaborating.

By acquiring control of Engen, the biggest fuel retailer in South Africa, PetroSA would be able to sell directly to consumers. It would gain access to customers in more than 20 African countries, while also adding refining capacity.

Engen’s plants and retail operations would constitute a “major addition” for PetroSA, Cornelis van der Waal, an energy analyst at Cape Town-based Frost & Sullivan Inc., said by phone. “There will be a lot of value for PetroSA to do the deal.”

Engen Operations

Engen has a 135,000-barrel-a-day refinery and a lubricating-oils blending plant in the eastern South African city of Durban, according to the company’s website. It mostly sells fuel in Africa through 1,500 filling stations.

Tania Landsberg, a company spokeswoman, declined to comment on any potential transaction. Azman Ibrahim, a spokesman for Petronas, couldn’t immediately comment when contacted by e-mail today.

PetroSA operates a 45,000-barrel-a-day gas-to-fuel refinery at Mossel Bay on South Africa’s southwest coast and plans a new crude-oil refinery near Port Elizabeth in the Eastern Cape province. The Cape Town-based company doesn’t own any retail operations, Thabo Mabaso, a spokesman, said by phone.

Petroliam Nasional, or Petronas, took control of Engen in 1998 by buying shares and then offering $465 million for the stock it didn’t already own. The Malaysian company later sold a stake in the retailer to a precursor of Pembani, a private-equity firm based in Johannesburg.

South Africa’s oil industry had sales of 267 billion rand ($27 billion) in 2011, according to the South African Petroleum Industry Association.

To contact the reporters on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net; Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net