Vivo Energy unveiled as Shell exits downstream oil business
Posted Friday, March 8 2013 at 02:00
Why sell? The downstream business in Africa was not as profitable as the firm would have wanted, thus the sale.
Unlike the Caltex and Agip brands that completely disappeared from the Ugandan market after buyouts, Shell is using a different approach to pullout from the downstream oil business.
In its pullout strategy, the Shell brand will continue to be used at all fueling outlets and branded lubricates despite having new majority shareholders, according to the new stakeholders.
Mr Christian Chammas, Vivo Energy (the new majority shareholders’) chief executive officer, said the move will help the new firm— which is about a year old—to ride on the back of a strong Shell brand to grow the business. This was at the official unveiling of the Vivo Energy Uganda brand in Kampala, yesterday.
Vivo Energy, a joint venture between Vitol Group, a Dutch firm Vitol, Helios Investment Partners - an African private investment firm and Shell was established on December 1, 2011 to distribute and market Shell-branded fuels and lubricants.
This followed the completion of a sale agreement between parent firm Royal Dutch Shell and the two firms where Shell sold majority stake in its African business that deals with retail, distribution and storage of petroleum products.
Vitol and Helios Investment own 40 per cent stake in the firm, each, while the 20 per cent is owned by Shell.
Vivo Energy will now manage and run fueling outlets and the distribution chain of Shell branded fuel and lubricants which was originally done by Shell.
For using the Shell brand, Vivo Energy will pay loyalties to Shell.
Shell has been slowly divesting from downstream oil business with experts hinting that that company wants to concentrate more on the upstream oil business which involves exploration, drilling and supply, which has proved more lucrative according to market experts.
Vivo Energy Uganda managing director, Mr Ivan Kyayonka, said the downstream business in Africa was not as profitable as the firm would have wanted, thus the sale.
“Africa is exciting and it has huge potential for investors but it was not as profitable to Shell as they would have wanted it to be. That’s why they thought it wise to sell stakes to a firm with expertise to grow it,” Mr Kyayonka said.
It currently operates in 13 countries including Uganda, Kenya, Namibia, Botswana, Senegal, Tunisia, Morocco and Mali, among others.
Mr Chammas said the firm will deploy best practices, invest in the construction of more outlets to grow its market share by between 20 and 30 per cent within the next three years.
Shell Uganda is said to have been the market leader in the distribution of oil products in Uganda, with about 30 per cent stake of the market.
Mr Chammas added that the firm will also invest in increasing its storage capacity to meet the increasing demand for oil products in the market.
Vivo Energy operates 1,185 retail stations under the Shell brand and has access to about 900,000 cubic metres of storage.