Sunday,17 December, 2017
Current issue | Issue 1292, (21 - 27 April 2016)
Sunday,17 December, 2017
Issue 1292, (21 - 27 April 2016)

Ahram Weekly

Here to stay

Saleh Abddali, the managing director of OiLibya Egypt, tells Sherine Abdel-Razek about the milestones in his company’s history in the Egyptian market

Here to stay
Here to stay
Al-Ahram Weekly

What is OiLibya’s history in Egypt?

The company was formed in 1994 under the name Tamoil Egypt, an affiliate of Tamoil which has activities in most of the African countries, in addition to a presence in Italy, Germany, Netherland and other European markets. We built on Tamoil’s expertise, which is why we had a strong start from day one in Egypt. In the first years of our debut in the market we focussed on building new petrol stations, a task that consumed considerable time from the company.

After two major restructurings, all the African units previously affiliated to Tamoil were gathered under the OiLibya brand name. 2010 was a turning point for the company as it bought Shell and Exxon Mobil’s downstream activities in more than 19 African countries.

Following these acquisitions, OiLibya became among the largest companies in Africa, with activities in 20 countries and more than 1,000 petrol stations and eight lubricant producing plants.

OiLibya Egypt is 78 per cent owned by OiLibya, 10 per cent is held by the Egyptian General Petroleum Authority (EGPC), and the remaining 12 per cent is owned by other investors, including two Egyptian businessmen. OiLibya itself is totally owned by the Libyan Investment Authority, a sovereign wealth fund that manages Libya’s assets in other countries.

 

What are your activities in the market?

In Egypt we have 86 petrol stations in addition to 20 service centres. In 2012, we inaugurated our lubricants manufacturing plant in Burj Al-Arab, a joint venture with the French oil company Total with an annual production capacity of 40,000 cubic metres. We also provide planes in all Egyptian airports with jet fuel, in addition to our bunkering activities, especially in the Suez Canal and Red Sea areas.

The company’s turnover in 2015 was LE2 billion. It has grown along the years, and while the period from 1994 to 2009 did not witness rapid growth, this has been made up for in recent years. The number of filling stations from 2012 to 2015 increased from 64 to 88. Since its inception and up to last year, the company has not distributed profits as we are reinvesting all our profits in expanding our activities.

OiLibya has a presence in 20 African countries. How do you find doing business in the Egyptian market compared to elsewhere? 

When compared to other African countries, Egypt is ranked highly as an attractive investment destination for OiLibya. No matter what problems we face, there is always a solution. Nevertheless, the bureaucracy is a chronic problem, not only in our field but also across the board.

While we abide by the rules and regulations related to getting permits and approvals, sometimes we are surprised by demands that were not listed in our initial contracts. I think we have got used to this, and when we make our future plans we take into consideration the lengthy procedures and difficulties we know we will face in the paperwork and permits. 

If OiLibya is taken as an example to judge the investment appeal of the country, there has been a notable increase in our investments along the years here. This has been accompanied by a hike in our sales and profits. There is a strong demand for energy products in the country with wide room for growth in both the lubricants and fuel lines of business. 

 

Has the company faced difficulties due to problems in the foreign exchange market?

It certainly has, even though we export and thus have an inflow of dollars. The increase in the value of the dollar against the pound has also pushed up our costs by the same percentage. The uncertainty does not help, as when I prepare a budget I need to know the price of products in the future.

When the dollar exchange rate increases, I either sell at the old price, shouldering the difference, or I transfer the burden to the customer. In such a competitive environment, increasing the price by 15 per cent, or the value of the depreciation of the pound, is harmful for our sales, so we resort to shouldering some of the burden. 

 

How about competition in the market?

The Egyptian market is highly competitive, as most of the multinational companies in this field work in Egypt. In the case of fuel, we find that the 10 largest companies worldwide, like Total and Exxon Mobil, have a strong presence here. As for lubricants, a much larger number of multinational players, like Shell, Caltex and a lot of others, are also competing.

While the price and quota of produced fuel is regulated by the government, the case is different with lubricants. In the low-grade segment, used by tractors and tuk-tuks, demand is linked to price. Other than this, the demand for high-grade oil used in most vehicles is driven by quality.

Egyptian consumers are currently aware of the different kinds of oil, with many following instructions found in the pamphlets of new cars recommending certain high-grade oils. I price my high-grade products lower than those of peer companies that have a longer history and a stronger presence in Egypt. To compete, you have to offer the same quality at a cheaper price.

 

What about demand in the market? Has it been growing in recent years?

I don’t know about the whole market, but for OiLibya Egypt sales jumped from 6,000 tons in 2012 to 20,000 tons last year. Moreover, the profits of last year were 12 times those in 2011. Whether this is due to an increase in demand in general or our own market share is increasing, I don’t know, but I think it is a mixture of both.

Lubricants are the fastest-growing segment among our activities in the market. It is a free market as it is not controlled by production or distribution quotas set by the EGPC. You decide your own margin and the volume of production.

Meanwhile, the volume of production in the subsidised diesel and octane petrol market is organised by a quota system imposed by the EGPC. Also the fees and margins are set by the EGPC, while the selling price is low. This is made up for by the large quantities, but still we have one of the lowest margins compared to that in our sister companies elsewhere in Africa. Due to the constraints on these oils, we are investing heavily in lubricants.

 

What about your exporting activities?

 In 2015, we exported 8,000 tons of oil which translated into $20 million. We export 40 per cent of our production, and while many of our sister companies also export their production we are still by far the largest exporter among them. We have an advantage here, as the cost of production is less as the cost of labour is low.

Also the availability of base oil in Egypt is another important factor. This has enabled us to be very competitive in our export prices to all African countries. Moreover, we export to European markets like Bulgaria and Greece. We are negotiating export contracts with Jordan, Algeria and Ukraine.

 

What are your future plans in the local market?

We are planning to expand in all sectors. We want to open new depots, one in Alexandria and the other in Badr, to store diesel and octane petrol. We also plan on expanding the capacity of our lubricants manufacturing plant OPSBA by 50 per cent through injecting new investments. While we want to open more filling stations, we can’t predict the exact number as it is dependent on finding suitable locations.

We adopted a new idea in 2014 to guarantee wider outreach by expanding in service centres. It is easy to build as much as you want all across the country in remote and secluded areas, and we offer services to those around these units. Since the end of 2014, we have opened almost 25 service centres. I believe that by the end of this year the number will reach 40 to 45.

We also have stand-alone centres in addition to those annexed to the filling stations. They are not only service centres where five to 10 cars go to change oil every day. We want to expand the scope of their work so that they start to market oil to the small workshops and factories surrounding them. On average, such service centres sell two million tons of oil per month. Our other centres sell 20 million to 25 million tons per month.

 

Both Egypt and Libya are facing politically unstable environments at present. How has this affected the company’s activities?

In 2011, our profits declined by 60 per cent, but we recovered immediately in 2012. The situation in Libya has affected our expansion plans. There was a plan to build 500 stations, as well as invest in setting up a refinery with billions of dollars in investment. All this has been frozen, as it depends on the injection of money by the Libyan government. 

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