Wednesday, November 5, 2008

Kenyan Nock turns to other options after losing Caltex bid to Total

By NATION Reporter Posted Monday, November 3 2008

The National Oil Corporation of Kenya has admitted that its failure to successfully bid for Chevon’s business, which it lost to rival Total, is a major setback to its expansion strategy.

However, managing director Mwendia Nyaga maintained that the State-owned firm will continue pursuing its strategy of increasing its presence in the market currently standing at less than 5 per cent.

“It is a setback for our plans because the (Chevron) business was well positioned, especially in Nairobi,” said Mr Nyaga.

He added: “But we will fall on our other options as we implement our strategy of attaining at least 15 per cent of the market.”

This could, however, be difficult because there may not be many operators willing to sell their businesses.

Planning to leave

Chevron Corporation, the American oil giant which has been planning to leave the country since last year, announced that its subsidiary - Chevron Africa Holdings Limited - has agreed to sell 100 per cent of its shareholdings in Chevron Kenya Limited and Chevron Uganda Limited to Total Outre Mer SA (Total).

Under the terms of the sale, Total is to acquire Chevron’s marketing businesses in both countries.

The assets on sale include 165 Caltex-branded service stations, one terminal, seven fuel depots, six aviation facilities, one lubricants blending plant, and a commercial and industrial fuels business.

“These sales are part of our continuing effort to increase efficiency and improve returns by creating better alignment between our marketing and refining operations,” said Shariq Yosufzai Chevron’s global marketing president in a press statement released last week.

Expand network

The transactions, where Total is said to have bid $200 million (Sh16 billion) to National Oil’s between $125 million and $135 million, are subject to obtaining relevant regulatory approvals and are expected to close in the first half of 2009.

With its current 63 outlets, the State saw Chevron’s 86 retail outlets on sale in the country as the best option for National Oil to expand its network.

Set up in April 1981, the company was to, among other things, act as a price stabilizer in the oil industry dominated by multinationals that exhibited cartel-like tendencies in their operations.

This is a position that the current administration has been pushing with Acting Finance Minister John Michuki and his Energy counterpart Kiraitu Murungi pushing for increased funding to enable it compete with the multinationals.