Shell’s sale of 20% stake completes exit from Africa downstream fuel business

By Brian Ngugi | Business Daily, Kenya January 2, 2017
Shell Oil Company logo on an oil tank.
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Anglo­ Dutch petroleum giant Shell has sold its remaining 20 per cent shareholding in Vivo Energy for $250 million (Sh25.5 billion), completing its planned pullout from the African oil retailing business that it started in 2011.

Shell said in a statement completion of the transaction is expected in the first half of next year, subject to regulatory approval.

Vivo Energy — which has been the Shell licensee in 16 African markets — is a joint venture between Vitol Group, a Dutch firm, Helios Investment Partners, an African private investment firm, and Shell.

It was established on December 1, 2011 to distribute and market Shell-branded fuels and lubricants.

Vitol and Helios Investment own a 40 per cent stake in the firm, each, while Shell owns 20 per cent.

The move to offload its remaining shareholding will see Shell follow in the footsteps of other global energy giants which have been divesting from the downstream oil business in Africa and other markets to concentrate more on the upstream business which involves exploration, drilling and supply — which has proved more lucrative according to market experts.

Shell announced in 2011 it would exit all African operating markets — except Egypt and South Africa — as well as cease some exploration activities.

“The sale is in line with Shell’s strategy to concentrate on its downstream operations where it can be most competitive,” Shell said. Shell however said its brand will be retained by Vivo in the retailing business.

“As part of the transaction, a long-term brand licence agreement has been renewed with Vitol to ensure that the Shell brand will remain visible in more than 16 countries across Africa,” said Shell in a statement.

“But for using the Shell brand, Vivo Energy will pay loyalties to Shell.”

Reduced profit margins, increased competition and official price caps have forced big oil marketing firms out of Africa as they shift focus to the more lucrative exploration and production activities.

Multinationals which have exited Africa since 2011 include Caltex (Chevron), Beyond Petroleum plc (BP), Mobil, Agip and Esso.

Vivo Energy operates in Kenya, Botswana, Burkina Faso, Cape Verde, Ghana, Guinea, Ivory Coast, Mali, Mauritius, Madagascar, Morocco, Mozambique, Namibia, Senegal, Tunisia and Uganda.

Its retail offerings includes fuels, lubricants, card services, shops and other nonfuel services (e.g., oil changes).

For businesses it provides fuels, lubricants and liquefied petroleum gas to business customers including marine, mining and manufacturing. Jet fuel is sold to customers at 23 airports though a partnership with Vitol Aviation.

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