jimmy report

8/18/2019 Jimmy Report

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Special Purpose Report

By

Fatdeo & Associate

The downstream sector of the oil and gas industry comprises two groups of companies

These are:

• The major oil mareting companies who dominate the industry as they account for

o!er "# $ of total petroleum products sold% and ha!e een in the usiness for much

longer than the independent mareters' The companies in this group elong to a trade

association called the (ajor )il (areters Association of *igeria +()(A*,' Si- major

mareters are listed on the *igerian Stoc .-change' They are:

Forte Plc

/onoil Plc (oil )il *igeria Plc

)ando Plc

Total *igeria Plc (RS Plc

The independent mareters% which comprises o!er 0%### largely indigenous petroleum

mareting companies' The trade group of these companies is referred to as the

1ndependent mareters association of *igeria +1P(A*,' The group also has two

companies 2uoted on the first tier segment of the *igerian Stoc .-change +Afroil Plc

and .ternal )il Plc,'


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THE MAJOR OIL MARKETERS

The /ompanies in this group had the starters3 ad!antage and sited their retail outlets at

strategic locations in major commercial centres across the country' The good capital

ase% good management and long e-perience in the industry helped them to consolidate

their position and dominate the maret'

The major mareters also ha!e some e-clusi!e marets e'g' a!iation turine erosene

for the a!iation industry and unering of !essels and other products for industrial

customers due to their percei!ed e-pertise in that su4sector'

CHARACTERISTICS OF THE MAJOR MARKETERS

Strong Brand Names

The foreign partners of the major mareters pro!ide them assistance in product

research & de!elopment% in!entory control% and product storage & handling' (ost of the

major mareters use rand names of the foreign partners maing their products readily

identifiale and fostering customer loyalty' At least two of the luricants produced y

the major petroleum products mareters ha!e attained 1S) 5### manufacturing

standards% which imply that products meet internationally accepted standards and thus

ha!e strong e-port potential

Brand recognition enhances product sales and helps the major petroleum mareting

companies to maintain and increase their maret share' Since the prices of Premium

(otor Spirit 4 P(S and 6ual Purpose 7erosene 4 6P7 are regulated% thus customer

perception of the mareter3s products as unadulterated is important' The good

reputation of the major petroleum products mareters gi!es them maret ad!antage in

this regard'

Strong Technical S!!ort

.ach major mareter has e-clusi!e technical partnership with o!erseas associates'

Product license agreements pro!ide them with technical information relating to

lending% distriution and mareting of industrial luricants' 1n addition% the

agreements grant them access to modern technology and manufacturing processes that

meet international standards' The foreign partners pro!ide technical nowledge to


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support research & de!elopment and also pro!ide operational ac up as may e

necessary for the products' This allows the *igerian companies to focus on mareting

and reduces the lead4time for introducing new products to the maret'

8ith a wide range of products that are identical to the products of the technical partners

elsewhere around the world% the major mareters ha!e a competiti!e ad!antage o!er theindependent mareters' 1n many cases% independent mareters cannot afford research

costs for their products considering that their total !olumes cannot support such

e-penditures' The technical partners also pro!ide top management staff for most of the

*igerian companies'

Strong Financial S!!ort

(ost of the major mareters ha!e good credit standing on account of the credit position

of their major shareholding companies' Their relationships with related companies inthe upstream sector also impro!e their maret perception and so it is relati!ely easy to

otain credit when necessary' 1n addition% eing 2uoted on the stoc maret +si- of them

are, pro!ides them ready access to the capital maret'

The major mareters are ale to implement sound management% operational and

mareting strategies to impro!e their performance and compete efficiently in the

maret' A strong financial ase is important in conducting their usiness and enales

them mae

COM"AN# No o$ retail otlets

%de!ot&

()B19; +


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Source:1ndustry

Basicin$ormation on ma'or!la(er

COM" AN# MAJOR SHAREHOL)ER

NO OFRELATE) "ARTIESEM"LO#EE

S

Total Societe Anonyme


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9imitedSouthern Air 9i

/he!ron *igeri>oldings

/>.?R)* /he!ron /orporation =#$ ";

9imited

Te-aco )!ersea>oldings 1nc'

/he!ron Te-acoTrading

Asset (anagement *ominees 9imited

AP@='@5$

0


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products y companies% group of persons and indi!iduals

1t is estimated that there are aout 0%;## independent mareters operating in the

industry !arying in siGe from the small ones with one or two retail outlets to the larger

ones owning more than twenty retail outlets'

The independent mareters include:

Petrol station owners

as plant operators 7erosene peddlers

)wners of luricant lending plants

The independent mareters focus on capturing the maret share of products withderegulated prices e'g' as oil + 6iesel, % 9P% luricants% etc' to impro!e their

profitaility' The maret for 9P and luricant pro!ides high margins and thus good

in!estment opportunities' So part of their usiness strategy is to aggressi!ely penetrate

this maret and gain maret share' They are also poised to ecome maret leaders'

1ndustrial supply of petroleum products is also attracti!e to the independent mareters

since they ha!e fewer retail outlets and it helps to oost !olume of sales

"RESENT STAT*S+

I"MAN has in its fold 0%;## +Three Thosand, Eight Hndred, memers and

;%=D@ +Eight Thosand, Si- Hndred and Se.ent( One, ser!ice outlets

*ationwide' )ur in!estments in the downstream are well

o!er N/0,111,111,111211+Twenty Fi!e Billion *aira,' There are aout #%###

*igerians employed y I"MAN memers3 ser!ice outlets'

STORA3E AN) RETAIL O*TLETS


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+a,Retail outlet storage capacity H 1P(A* ;$

H (ajor @;$

+, Retail outlets nationwide H 1P(A* ;=$

H (ajor @


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• Retail

1ndustrial sales are ul supply of products to large consumers and generally the

products are not pro!ided through the retail outlets also called filling stations'

1ndustrial sales accounted for aout 0@$ of the turno!er of the industry in #@@ as

compared to =$ in the pre!ious year'

Retail sales tae place at the filling stations and sales flow is mainly to low !olume

consumers' 1n #@@ Retail sales accounted for =5$ of aggregate sales of petroleum

products in terms of !olume as compared 6emand from industrial users is also affected

y reliance on Power >olding /ompany of *igeria +P>/*, to pro!ide electricity since

most factories in the country operate industrial machinery' 8hen power supply from

P>/* is una!ailale% plant and e2uipment must e run y power generating plants '

Bul supply can e profitale to mareters ecause it enales large !olumes of products

to e supplied con!eniently' (aret forces usually determine prices of products' /reditsales are sometimes allowed to industrial customers especially when products supply is

readily a!ailale

Success in selling to industrial users is largely dependent upon aggressi!e mareting

management% capacity to e-tend competiti!e credit facilities% good customer

relationship and reliaility of supply of products'

Terms o$ trade

The terms of trade with the industrial customers depend on the alance of supply and

demand for 6iesel in the maret' 6uring periods of high demand or scarcity% the

customers must deposit the full !alue of the products they order to e-pect deli!ery'

/redit is usually e-tended to the industrial customers' >owe!er the numer of days for

which credit is e-tended is suject to the numer of days the mareters recei!e from

their suppliers' >ence credit allowed is competiti!e strategy among mareters'

Retail Cstomers

61.S.9 distriuted through retail channels are mostly for transportation and

household consumption' Retail outlets are the major channels for selling 61.S.9

Retail outlets are located across the country and their accessiility maes them the last

resort for industrial users also' Presently% there are aout =%=#" retail outlets

nationwide% popularly called petrol or filling stations' They are multi4purpose centres


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where petroleum products and auto4related ser!ices are sold to the pulic' A typical

retail outlet offers opportunity for uying all the white fuels% luricants and auto4care

products% ser!icing automoiles% greasing pit% inflating of tyres and other ser!ices that

promote petroleum products demand'

Mar6et Share o$ A3O %)iesel&

)ando Plc is leading the major mareters in the industry with its sale of diesel with a

maret share of @ $' % Total ;$% (RS had @#$ % ()B19 had D$ % F)RT. &

/)*)19 with


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Smmar( 7 Facts A8ot )iesel Mar6et in Nigeria

*igerian petroleum product prices are not entirely dependent on world

maret for crude oil and petroleum products 6iesel prices in *igeria lie other commodities are determined y

Supply6emand forces not Production cost The international prices for diesel is affected y the demand for other

petroleum product% This is ecause diesel is one of the middle distillates%

which also includes erosene % Iet Fuel and heating oil %1f refiners produce

more erosene or jet fuel as a result of increased demand % they would

produce less diesel and that has impact on supply a!ailaility and price There is a seasonal shift of refining production from petrol in summer

toward distillates +Blac oil, 1n the winter that3s affect relati!e prices of

these products' 6iesel prices are also affected y Jparallel maretK from the acti!ities of

local illegal refiners in the *iger 6elta 6iesel from local refinery is relati!ely cheaper than that of imported ones The *igeria retail price for diesel can e significantly higher or lower than

that of the international JplattsK price % due to the internal impact of

different supply and demand pressures *igerian diesel maret is fully 6e4regulated

6iesel is one of the dominant fuel in *igeria and in recent years they ha!e

significantly increase in demand % particularly as result of the

infrastructural deficit in the power sector in the nation % amongst other

reason

*igeria demand growth has also een strong on the ac of growing

economy and higher demand from industries

6emand is also dri!en y increase in oth the nation3s population and

growing economy

D"$ of diesel in *igeria are imported


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(ost of the imported diesel are ought from international trading

companies4 offshore cotonou

6aily A!erage demand for diesel 44444444 @;%###%###ltrs i'e@"%###(T6ay

Total local daily refining capacity for diesel is put at @@%#5%#05litres

A!erage daily local refinery output is =%###%### 9itres

A!erage daily 1mported 6iesel into *igeria ;%###(t

92:1 )EMAN) 7 S*""L# "ROJECTIONS FOR "ETROLE*M "RO)*CTS

?arious scenarios ha!e een adopted to forecast future demand and supply for

petroleum products y us % They are:

8orst /ase: /omination of high 6P growth with long spanrehailitation of refineries and low refinery capacity% leading to 0'=$

demand growth per annum'

.-pected /ase: (edium 6P growth with 04< years refinery rehailitation

and refineries at less than full potential% leading to ';$ demand growth

per annum'

Best /ase: 9ow demand case% accelerated rehailitation of refineries and

capacity restoration% leading to '#$ demand growth per annum'

8ith the .-pected /ase% total products demand is projected to grow from


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.!en with full rehailitation of the refineries% not more than


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To8al acid nm8er %mg2

KOH=g&

#'" +ma-,

Ash content %@t& #'#@ +ma-', 5ater 8( distillation

%@4ol2&

#'#" +ma-,

5ater 8( e-traction%@t&

#'#@ +ma-',

)iesel inde-

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