China Petroleum & Chemical Corporation (a.k.a. Sinopec), a subsidiary of Chinese state-owned oil, gas and petrochemical producer Sinopec Group, has agreed to pay US$900 million (R11.3 billion) for 75% of Chevron’s South African assets, the company said last Wednesday. The deal is subject to approval by regulatory authorities.

Per the deal, Sinopec will acquire 75% controlling stake in Chevron’s South Africa assets and its Botswana assets including a 100,000 barrel per day oil refinery in Cape Town, a lubricants plant in Durban and a network of around 820 gas stations. The other 25% of Chevron’s South African assets are owned by a consortium including the South African National Taxi Council, African Legend, Lithemba and Ditikeni and by an employee trust.

Apart from the refinery, Sinopec Corp is buying a lubricants plant in Durban, 820 service stations and 220 forecourt convenience stores in South Africa and Botswana and storage facilities. It will hold 75% of the South African assets and 100% of the Botswana assets, subject to regulatory approval of the deal.

Sinopec will continue with Chevron’s Caltex brand name for the retail fuel stations for around five years until it forms a rebranding strategy. The company will also be making technological upgrades at the acquired assets to meet local demand and drive growth of the indigenous oil industry.

Like others in South Africa, this refinery can only produce fuel to meet the Euro 2 emissions standard. The latest vehicle models are designed to take Euro 5 or Euro 6 fuels.

Chevron has executed the sale of its South Africa business as a part of a three-year divestment program announced in 2014. It made unsuccessful attempts to step growth through new fuel storage facilities, but the stringent clean-fuel standards from the Government forced them to reconsider the sale of its South African assets. Chevron estimated that it would need to spend $1 billion in order to upgrade the refinery, hence, selling it off, was a viable option.