Malaysia’s state-owned oil company, Petroleum Nasional Bhd (Petronas), has backed out of a deal worth about ZAR18 billion (USD1.56 billion), to sell Engen’s fuel retail business and its aging 135,000 barrel-per-day refinery to The Petroleum Oil And Gas Corporation Of South Africa (PetroSA). Petronas owns an 80% stake in South Africa’s biggest fuel retailer, Engen Petroleum.

It was reported that Petronas believed that PetroSA, the national oil company of South Africa, could not carry the debt that would have resulted from buying Petronas’ 80% stake in Engen. PetroSA sells petrochemical products to the country’s major oil companies. Currently, its cash holdings are about ZAR5 billion (USD434 million).

While the decision was communicated by Petronas to PetroSA CEO Nosizwe Nokwe-Macamo and Energy Minister Tina Joemat-Pettersson in late December, the information was not made public until this month.

Petronas’ decision to back out of the deal may have come from the fact that in October 2014, PetroSA had financial difficulty surrounding its Project Ikhwezi. The project involved trying to prolong the life of the Mossgas gas-to-liquids plant near Mossel Bay by seeking further resources southeast of the gas field. Delays and rising costs of the project turned into PetroSA impairing its production and exploration assets by about ZAR3.4 billion (USD295 million).