The competition commission this week conditionally approved a controversial joint venture between Sasol, Engen and Petronas, which led to the establishment of South Africa's largest liquid fuels business, Uhambo Oil.

The competition commission this week conditionally approved a controversial joint venture between Sasol, Engen and Petronas, which led to the establishment of South Africa's largest liquid fuels business, Uhambo Oil.


Uhambo will supply rival oil companies in the inland market, where Sasol dominates with 87 per cent of refining capacity, until Petronet's R3-billion oil pipeline between Durban, Johannesburg and Pretoria is operational by 2010.


The commission obligated Uhambo to supply oil firms with shortfall volumes at prices that did not exceed predetermined levels and that did not discriminate against rival businesses.


Nevertheless, the commission said the proposed transaction was likely to lessen competition in the petroleum industry because of logistical constraints underlying other oil companies' ability to ship adequate products to the inland region.


"However, the planned introduction of the pipeline would bring structural changes in this market," it said.


According to BP South Africa was disappointed by the recommendation, which, if finally approved by the competition tribunal, “will create a petroleum giant that could lock out existing competitors and preclude new entry by black economic empowerment (BEE) players”, it reported on Friday.


BP opposed the merger because “Sasol would have a strong incentive to supply Engen, which has 40 per cent of the inland retail market, at the expense of other customers” and that “there was potential for price increases in a deregulated environment”.


The proposed merger will result in Sasol and Engen each owning 37,5 per cent of Uhambo, while 25 per cent will be jointly held by BEE partners Tshwarisano and Worldwide Investment Holdings. Tshwarisano is a group led by former justice minister Penuell Maduna and previous Exel shareholders.


Worldwide owns 20 percent of Engen through its wholly owned subsidiary, Africa Energy Resources.


The joint venture comprises Sasol's and Engen's liquid fuels businesses in the retail, commercial and wholesale markets, including the Enref oil refinery in Durban, Sasol's share in the Natref crude oil refinery at Sasolburg, about 1 600 retail service stations branded as Engen, Sasol, Exel and Zenex, as well as liquid fuel operations in 13 other sub-Saharan countries.