The Observer (Kampala)

Uganda: Vivo to Stay Out of Oil Exploration

Vivo Energy, the company that acquired Shell's assets in Africa's downstream industry, will not invest in Uganda's upstream industry, preferring to beef up its presence in selling petroleum lubricants.

Uganda needs at least $10bn to put in place infrastructure before oil production starts. That bill has seen government go on a charm offensive to lure investors into the sector.

Vivo's announcement that it prefers to concentrate on the downstream industry narrows Uganda's options to tap the bigger players, but at the same time opens up opportunities for smaller and hungrier investors that have been prowling around the country looking for investments with a good return.

Shell, a global oil giant, sold 80 per cent of its retail assets in Africa to Vitol, the world's largest oil trader, and Helios Investment Partners, an Africa-focused private equity group. Vivo Energy was formed from this partnership. Shell will control the remaining 20 per cent.

Ivan Kyayonka, the managing director Vivo Energy Uganda, said Shell's phased-out downstream operations in Africa, Latin America and some parts of Europe is meant to enable the company concentrate on its global upstream footprint.

"Many players are quitting Uganda's downstream petroleum sector, but Shell has decided to do it differently. From today Shell Uganda evolves into a new strong company Vivo Energy Uganda limited," Kyayonka said. Shell has been in Uganda for more than 70 years, and the brand name will remain Shell for the next 10.

Christian Chammas, the chief executive officer of Vivo Energy, said the firm believed in the potential of Africa. He, however, insisted Vivo would not venture into Uganda's upstream (exploration) sector. Kyayonka said despite the takeover, all the about 4,000 staff at Shell had retained their jobs.

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