"Nigeria’s downstream business is one of the most fragmented downstream and low margin markets in the world. The margins on premium motor spirits (petrol/gasoline), where the price on the pump is regulated by government, is one of the lowest in the world. These are challenges OVH Energy Marketing has to address."
Can you give an overview of OVH Energy and the role the company plays in the oil and gas industry in Nigeria?
Through its subsidiaries in Nigeria, Ghana and Togo, OVH Energy sources, distributes and retails petroleum products such as Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), House Hold Kerosene (HHK), Aviation Turbine Kerosene (ATK), Low Pour Fuel Oil (LPFO), lubricating oils and greases, and LPG through its wide network of over 350 retail outlets.
Its infrastructure subsidiary, Apapa SPM Limited (ASPM), owns and manages West Africa’s first privately owned midstream jetty known as the Lagos Midstream Jetty (LMJ). The LMJ operations cover the transfer and delivery of petroleum products from vessels via a single point mooring system to a combined storage network of over 200,000 mt in the Apapa axis of Lagos, Nigeria, thereby improving product delivery and offloading efficiency of petroleum products into marketers’ storage facilities. This has contributed significantly to our positioning as the leading downstream company focused on providing trusted petroleum products and services in Nigeria.
Nigeria’s downstream business is one of the most fragmented downstream and low margin markets in the world. The margins on premium motor spirits (petrol/gasoline), where the price on the pump is regulated by government, is one of the lowest in the world. These are challenges OVH Energy Marketing has to address. When one has a low margin market, competition is intense. OVH has to be creative in dealing with its customers, distributors and suppliers, and grow or find partnerships that might enable us to improve our offering or standing. We believe that technology will aid us in the future. We have already implemented process optimisation, organizational restructuring, and re-financing of the company, but one can only implement these measures if there is a strong foundation to build on.
How does OVH Energy Marketing use technology to address these challenges?
OVH wants to implement technology faster, and at a lower cost than our competitors. We have, for example, automatic gauges in all our tanks at retail fuel sites so that we can remotely see how much fuel is left and if the site is at risk of running dry.
From a logistics point of view, it is important to ensure that the product is delivered just in time, instead of having to let the truck wait for a day when there is still too much fuel left in the tanks. Technology allows one to see how much each pump delivers, to ensure that the product gets properly shipped and dispensed to the customer, both from a quality and a quantity point of view.
Customers also want different payment platforms that will suit them. As a business, we are leveraging technology to provide multiple payment solutions for our customers.
Can you comment on the ease of doing business in Angola and in Nigeria?
Angola is a huge country with a relatively small population (24 million) compared to Nigeria. The government has fewer people and territories to manage. Most of Angola’s upstream assets are offshore and have less impact on local communities. In terms of ease of business and the scale of investments, the two countries are different and Angola is potentially slightly easier to do business with.
Nigeria is a huge country, with a population of more than 190 million spread across the territory, with
on-shore and off-shore assets and an infrastructure in need of maintenance. There is a huge demand, and hence it makes sense to build a big refinery in Nigeria. In Nigeria you have state and federal governments; investors and operators have to deal with both state and federal laws and regulations, whereas in Angola there is one government.
Although Nigeria has huge gas reserves, even more than oil reserves, they still need to diversify the economy. The strength of an economy lies in diversification. Nigeria could for example become one of the technology hubs of Africa. One needs to diversify one’s economy when there is money and time to do so. I hope that Nigeria uses the time while the oil and gas prices are reasonable to invest in those areas.
In terms of the mismanagement of state-owned refineries in Nigeria, do you think privatization is the answer?
In the 1990s refineries were owned by the state and worked efficiently. However, a lack of investment and maintenance, and too many skilled people moving away changed things - but if one focuses on running an asset efficiently, be it a depot, a refinery or a pipeline, it does not matter who the owners are. People are in favor of privatization because they have lost confidence in the government, but that does not guarantee its optimal use. Companies need to create public-private partnerships. These refineries are Nigerian assets, but they need to earn for the country, even if some aspects are outsourced to private partners.