Shell/Vitol deal sparks outcry

The decision by Shell International to sell about 82 percent of Shell Ghana to Vivo Energy is causing serious ripples in the downstream petroleum sector in the country.

The hue and cry about the sale stems from the fact that the deal could potentially wipe out all the local players in the sector, and could do serious damage to the economy.

Vivo Energy, the company formed by Vitol, Helios Investment Partners and Shell to distribute and market Shell-branded fuels and lubricants across Africa, has acquired majority shareholding in Shell Ghana Limited.

Vivo Energy is owned by Vitol, which already participates in the downstream sector by selling crude and refined products to bulk distribution companies (BDCs) in the country.

Due to Vivo's acquisition of the almost-80 percent share of Shell Ghana, Vitol now gains direct access to all Shell filling stations in the country, and consequently it can undercut locally-owned businesses through predatory pricing to eventually become a monopoly and thus drive up prices for profits.

For Vitol to enter the OMCs' area of business as well through Vivo points to a vertical direction that the industry regulator, National Petroleum Authority (NPA), has not indicated, to date, is permissible.

The integration therefore flies in the face of the on-going deregulation of the industry, and will put all other industry players -- namely the BDCs, OMCs, and traders who compete with them -- at a distinct disadvantage. Instructively, the transaction offends the National Petroleum Authority's (the regulator) directive which requires that all oil marketing companies must be 50 percent Ghanaian-owned.

The NPA Public Notice NPA 002 requires all oil marketing companies to be 50 percent Ghanaian owned. In fact, Shell -- at the time of passage of the directive -- was exempted because the company existed before it came to effect.

However, with regard to VIVO Energy -- since it is a new entrant into the market, it was expected that the directive should have applied, and as such must be 50 percent Ghanaian-owned.

Under the current ownership structure, VIVO Energy will still be more than 80 percent foreign-owned -- and this clearly makes it ineligible to operate in the downstream sector.

The deal has thrown up a number of questions as to why the regulator gave its approval when there were protests from interest groups because the various processes stipulated by the NPA Act were not followed.

Meanwhile, a press statement issued by Vivo Energy Ghana has named Fred Osoro as Managing Director of the company.

He will take over from Vincent Richter, the former acting Managing Director of Shell Ghana. Mr. Osoro has 20 years experience in the energy industry, during which he has held various management and marketing positions for Esso, Mobil and Engen -- including Managing Director for Engen Ghana and Nigeria. His appointment to the Board will be formalised at the next Board meeting.

Christian Chammas, CEO of Vivo Energy, said: “Ghana is an important market and a growing economy that is set to benefit from significant developments in the energy sector. We are acquiring a business with great potential; a long history in Ghana; a high-calibre workforce and a large and diversified customer base.

"Vivo Energy is looking forward to serving our Ghanaian customers and investing in the business to ensure it realises its full potential under Fred Osoro’s leadership.”

The Shell brand has been in Ghana for 85 years, and Shell has been the leading marketer of fuels and lubricants. Vivo Energy Ghana has a storage capacity of 8,300m³ and 124 retail stations, with the majority offering Shell Cards and convenience retail stores.

Over the years, the company expanded its portfolio by acquiring Texaco in 1988. Vivo Energy Ghana employs 134 people but the business provides indirect employment to over 1,000 people. The company is recognised as the leader in the oil industry, especially championing and setting standards for safety in sales and distribution.

This is the latest development in a venture initially announced in February 2011. It brings to15 the number of African markets in which Vivo Energy has a presence.