Global oil major Total is investing heavily in its African refining and marketing operations, where it expects to record 20% growth over the next few years, according to Philip Jordan, CEO and MD of Total South Africa.
Addressing the Ninth Annual Africa Downstream conference in Cape Town on Monday, Jordan said Total is “extremely optimistic” regarding the outlook for its downstream business in Africa.
The group’s recent acquisition from ExxonMobil of 500 service stations and fuel marketing rights across 14 different African countries, as well as 29 depots and terminals, makes Total the largest company in the African downstream market in terms of market share, he said, lifting it above rival Shell.
“We are now the number-one player in both the upstream and downstream markets in Africa, and the ExxonMobil acquisition confirms our commitment to growth and investment in Africa,” Jordan said.
Total had been vying closely with Shell for the acquisition, he revealed. It gave the company about 4 800 service stations across the continent and a total market share of 24,5% of the estimated 44% share held by the international oil companies in Africa’s overall retail market.
Africa is an important part of Total’s overall future strategy, he added, currently accounting for 14% of all refining and marketing sales and 24% of all retail network sales. Total has stakes in eight different oil refineries across the African continent as well.
It is a growth market with “great potential” and development opportunities, the CEO noted, yielding healthy economic returns, while European retail markets, the other region in which Total operates downstream, are mature with smaller retail margins.
Given the more regulated nature of African markets, oil companies in general enjoy higher retail margins on their products than those earned in other, more liberalised, parts of the world. Refining margins are more competitive because of the more open trading structure of the market.
“There have been price wars in the European retail market in the recent past, and therefore those in Africa must be superior,” Jordan observed. “The refining margins worldwide are currently very high — being driven by the extremely high demand and little investment in refining in the past, which should lead to new investment at some stage.” — I-Net Bridge