Oando Sells 60% of downstream business to Vitol for $276m

Report from reuters indicates that Nigeria’s Oando has agreed to sell a 60 percent stake in its downstream business to Vitol and Helios Investment Partners for $276 million, the energy company said on Tuesday.

Nigeria Oando logo

Oando, which is shifting away from being a marketer of refined petroleum products into an oil and gas explorer, completed the acquisition of ConocoPhillips’s upstream oil and gas business in Nigeria last year.

Its downstream business, with a market share of 12 percent in Nigeria, will be set up as an independent entity, but will retain the Oando brand, the company said in a statement. The consortium will acquire 51 percent of the voting rights.

Oando’s downstream assets include more than 400 petrol stations in Nigeria and an interest in a bulk distribution company in Ghana, it said. Oando also has listings in Toronto and Johannesburg.

Soros-backed Helios has already partnered with Vitol to distribute Shell-branded fuels and lubricants in 16 African countries and is confident the new deal will capitalise on the 3-5 percent annual growth in Nigerian demand for oil products.

Nigeria exports nearly 2 million barrels per day of oil but imports the bulk of its refined products because its refining capacity is unable to meet its daily fuel consumption of 40 million litres.

Vitol has bought downstream assets such as storage and refineries in Europe, most recently in conjunction with Carlyle Group in the Varo Energy venture.

The acquisition of Nigeria’s second-largest downstream fuels company follows the March election of Muhammadu Buhari as president of Africa’s biggest crude producer, with pledges to reform the oil industry. It also builds on the partnership between Vitol, the world’s largest independent oil trader, and Helios that already includes a distributor of Shell-branded fuels and lubricants in 16 countries on the continent.
“This investment is a further reflection of our confidence in the Nigerian economy and will be independent of the services we provide to our long-standing Nigerian customers,” Ian Taylor, president and chief executive office of Vitol, said in the statement.
Oando, which will hold 40 percent of the business, said in separate statement that the transaction values the downstream operation at $461.3 million. The unit controls about 12 percent of the Nigerian market, Vitol said.
Commodity traders including Vitol and Trafigura Beheer BV are targeting fuel storage and retail businesses in Africa, Europe and Australia to complement their crude and oil product trading operations. Trafigura is the largest shareholder in Puma Energy, which has operations throughout Africa, including Angola, Ghana and the Democratic Republic of Congo.
Growth Potential
Tope Lawani, co-founder and managing partner of Helios, which manages funds totaling more than $3 billion, said he expects the Oando business to benefit from strong economic growth in Nigeria. Africa’s biggest economy has annual fuel demand growth of 3 percent to 5 percent, Vitol and Helios said.
The slump in crude prices has spurred a series of oil storage and infrastructure deals by commodity traders. Varo Energy, a venture between Vitol and private-equity giant Carlyle Group, agreed last month to merge with Argos Energies to create a Western Europe-focused refining, pipeline and distribution company.
The Oando purchase still requires regulatory approvals, said Vitol, which acquired Shell’s Australian refinery and filling stations in a $2.6 billion deal last year.
Buhari, who took office on May 29, defeated Goodluck Jonathan on pledges to clamp down on graft, including in the oil industry, the source of about two-thirds of the government’s revenue and 90 percent of export earnings. Buhari has already disbanded the board of Nigeria’s state-owned oil company and promised to overhaul crude sales and imports of refined products.
The new president may choose Oando Chief Executive Officer Adewale Tinubu as his oil minister, Morgan Stanley wrote in a note on May 18.more news from:

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