The Standard Group Plc is a
multi-media organization with investments in media platforms spanning newspaper
print operations, television, radio broadcasting, digital and online services. The
Standard Group is recognized as a leading multi-media house in Kenya with a key
influence in matters of national and international interest.
A Total filling station. Analysts say the takeover will give the oil marketer a headstart over its rivals because of Gapco’s massive assets. [PHOTO: FILE/standard]
French oil major Total Outre Mer is set to become the dominant player in East Africa’s oil industry with the acquisition of Gulf African Petroleum Corporation (Gapco).
The Paris-headquartered firm, with well-established links through Total Kenya, Total Uganda and Total Tanzania, will now enjoy the full economies of scale in both downstream and upstream sectors, riding on the massive assets of Gapco.
Total is not new to acquiring oil businesses. It acquired Elf Oil Kenya Ltd and Chevron Kenya Ltd (Caltex) in 2000 and 2009 respectively to become the largest oil and gas marketer in Kenya.
The latest development comes when Total exploration and production unit in Uganda has also acquired a major stake in Tullow Oil to put its stake at 54.9 per cent.
As a major shareholder, the firm is promising to steer Uganda into being an oil producer, with first exploration expected in three years’ time. This puts Total in prime position to benefit from the huge explorations.
Eric Musau, an analyst at Standard Investment Bank noted that the deal would strengthen Total’s position in the region given that it also has interests in upstream business in Tanzania.
Mr Musau said Uganda is set to benefit more by having Total handling both exploration and transport.
“The Government has to be careful to get the most affordable infrastructure and if it can get the pipeline and production from the same company, then it will ensure than when revenues start flowing in, it will get a good amount,” he said.
Gapco, 76 per cent-owned by Indian mogul Mukesh Ambani through India-based Reliance Industries Limited, it has been in control of the oil import tenders in Kenya.
Lowest price
Industry data from Petroleum Institute East Africa (PIEA) by close of September showed Gapco dominated imports followed by Total Kenya.
Data to September showed that Gapco won 20.4 per cent of all the tenders called by the Ministry of Energy through open tendering system where oil marketers compete on basis such as who offers the lowest import price.
Total came in second, winning 18 per cent of the import tenders. Therefore, in the absence of Gapco, Total is set to dominate the oil import business in Kenya.
Gapco also runs storage facilities at the port which it leases to other oil marketers to store their stock. This will be an added advantage to Total operations in the region because it will significantly cut on its storage costs.
Gapco’s success in the import business has been hugely due to it being backed by Reliance Industries, which owns the largest oil refinery in the world. This has a capacity to process 1.24 million barrels per stream day.
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With the 24 per cent minority stake in the firm also being sold to Total, the firm will be 100 per cent in control, meaning decision-making on key business strategies will also be swift.
By close of September last year, Total was the second biggest oil marketer in Kenya with a market share of 13.4 per cent, behind David Ohana-led KenolKobil (13.8 per cent).
However, on sales market, Total was in control with 16.7 per cent of sales going to it. Gapco was ninth with 3.3 per cent of the market share. Therefore, with the benefits of Gapco going to Total, chances of Total taking market leadership including exports are very high.
In Kenya, the firm is the leader in the Liquefied Petroleum Gas (LPG) business. In September, it was commanding 23.9 per cent of the market followed by Hashi at 22.2 per cent. KenolKobil was third at 12.7 per cent.
It commands 39.7 per cent of the lubricants market behind Vivo Energy, which beat it narrowly by 0.3 percentage points as per last September data.
Regionally, the firm is also set to become the leader in the number of retail outlets. Currently in Kenya, 23 per cent of all the retail outlets (174 petrol stations) are under its name. Only Vivo Energy ranks better at 25.7 per cent.
Gapco has been more into the import business than retailing and, therefore, only accounts for 0.7 per cent of petroleum oil stations in Kenya. But in Tanzania, it has over 80 stations and more than 37 stations in Uganda.
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The Standard Group Plc is a
multi-media organization with investments in media platforms spanning newspaper
print operations, television, radio broadcasting, digital and online services. The
Standard Group is recognized as a leading multi-media house in Kenya with a key
influence in matters of national and international interest.
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