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Kenya: Shell Executives Forecast New Era in Africa After BP Takeover
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East African Business Week (Kampala)
29 October 2007
Posted to the web 29 October 2007
Nairobi
Royal Dutch Shell agreed to sell its shares to Kenya's state-owned National Oil Company (NOCK) in exchange for statutory approval for its BP takeover, the company's senior management disclosed recently.
The company sold at least 10 percent of its BP former oil distribution stations to NOCK.
Shell disclosed its takeover of BP Africa operations in Kenya was tied to conditional reduction of its shares in the new venture in conformity with the monopolies regulations.
"We have ambitious plans to grow our businesses in Africa. With our acquisition of the 127 BP stations (in the country), we are well-stationed to play a role," Mr. Rob Routs, Shell's Executive Director, told a news conference in Nairobi last week.
BP's takeover has opened a new era in the firm's operations in Africa, where big multinationals are walking out due to the loss of market dominance positions in wake of an onslaught from smaller oil distributors.
Energy analysts say the foreign multinationals and their subsidiaries are no longer profitable in Africa due to higher overhead costs, including branding of fuel stations, fat-pay cheques for top executives and other emoluments.
Routs said Shell saw an opportunity to double its stake in the Kenyan oil distribution market when BP announced in 2006 that it would be bailing out.
The announcement came nearly two years after BP came under intense pressure to pay up its 50% stake in a joint venture with its Russian partners. BP created a joint venture with TNK, a group owned by Russia's Alfa and Access/Renova (AAR).
BP promised in 2003 to pay up US$3.75 billion in tranches of three years to gain full subscription of its shares in 2007 but the Russian investors pushed BP to enter into an upfront payment deal to enable the joint venture to invest in profitable ventures.
It was not immediately clear whether the pressure BP was undergoing in Moscow had any impact on its decision to pull out of the Kenyan market.
"BP was willing to pull out. We saw an opportunity and we took the direction to double our business in Kenya...we can now implement the Shell brand which is a very strong brand," Routs told journalists during a news conference at a Nairobi hotel.
Shell Kenya, a subsidiary of the Royal Dutch Shell, has had a marketing joint venture with BP Africa which ended early this year with Shell's acquisition of BP shares in Kenya.
Shell Kenya chairman, Patrick Obath, said the BP takeover has enabled Shell to enjoy a free hand in decision-making which was not the case when the joint venture existed.
"It is easy to make decisions to manage the 120 service stations across the country after Shell bought the BP shares making Shell Kenya a wholly owned Shell subsidiary," Obath said.
NOCK is among a group of local and international firms which bid for BP's shares when the Kenyan subsidiary was put on sale towards the end of 2006.
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Shell executives have declined to give any figures on any of the purchases.
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| Copyright © 2007 East African Business Week. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections -- or for permission to republish or make other authorized use of this material, click here. | |||||||||||||||||||||||||||||
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