Small oil firms eat into market share of multinationals

Last Updated 13 years ago by Kenya Engineer

Source: Business daily

Local oil marketers have gained 7.7 per cent of Kenya’s fuel business from multinationals in the past three years as Total widened its lead ahead of KenolKobil.

Data from the Petroleum Institute of East Africa, the industry lobby, shows that the market share of the multinationals dropped to 67 per cent last year from 74.7 per cent in 2010 and 85.5 per cent in 2007.

OiLibya and Total have seen their market shares drop by more than six percentage points in the review period while VIVo Energy (formerly Kenya Shell) and Kenol recorded gains of between one and 1.4 per cent.

Apart from OiLibya, the other three multinationals including VIVo Energy, KenolKobil and Total Kenya — which acquired Chevron assets last year at Sh12 billion — have lost market share of between 1.5 per cent and nine per cent.

Smaller dealers like National Oil Corporation, Hashi Energy, Bakri, and Gulf Energy have increased their combined market share from 25.3 per cent to 33 per cent in the same period.

“We are seeing a consistent growth of smaller oil companies who are growing their retail network at a faster rate than the oil majors,” said Mwendia Nyaga, an oil industry analyst.

He added that smaller oil marketers have significantly improved their infrastructure and human resource capacity in recent years, a move that has seen them wrest some market share from their established rivals.

Smaller players have also benefited from their low-cost operations compared to those of multinationals. The local players are making their money from selling fuel to independent dealers commonly referred to as resellers and corporate institutions such as power generators, which are emerging as market share drivers for players with fewer retail stations.

The biggest loser in the ongoing market shift is Total Kenya, which has seen its market share drop by 6.1 percentage points since 2010. The market share of Total, which acquired Chevron Kenya’s assets in 2009, stood at 27.5 per cent in 2010 and has since dropped to 21.4 per cent last year.

Among the major oil firms, however, Total widened its lead ahead of its closest rival Kenol, posting a 21.4 per cent market share in December compared to Kenol’s 20.8 per cent.

This gave it a 0.6 percentage point lead compared to September when its 21.5 per cent market share beat Kenol’s by 0.1 percentage point.
Kenol’s dropping market share has been linked to the oil marketer’s decision to end its popular fuel price discount promotion on August 27.

The company has credited its previous market share gains to the promotion that saw it lower its standard retail prices by Sh2 to Sh5 per litre.

Despite the gains, Total posted a net loss of Sh243.6 million in the nine months to September as sales increased 15.2 per cent to 86.7 billion.
Its share price has lost 0.32 per cent in the past six months to trade at Sh15.5 compared to Kenol’s that has lost 23 per cent to Sh11.65 per cent.

Kenol’s share price has taken a major hit in the past two weeks after Puma Energy dropped its bid to acquire the oil marketer, ending the stock’s previous rally that was linked to speculation of high returns from the expected buyout.

The firm’s share price had gained 16.8 per cent in the 12 months to March 1 to trade at Sh13.2 despite posting a massive Sh3.8 billion net loss in the half year ended June 2012.

The firm also issued a profit warning for the year ended December, with the previous stock rally linked to speculation among some investors after the deal was first announced in May last year.