Africa’s petroleum retail sector to undergo more M&A activity

As Africa’s petroleum retailers seek to achieve better economies of scale, the sector will continue to experience mergers and acquisitions (M&A) activity in coming years, according to a new study by pan-African investment research agency Hawilti.

Challenging operating and regulatory environments in Africa have already led to the exit of most major international oil marketing companies, to the benefit of national and regional actors. But additional consolidation is expected, especially around a few well-established companies.

Four players in particular known as “The Big 4” are emerging as leaders in the marketing and distribution of petroleum products on the continent: TotalEnergies, Vivo Energy, Engen and OLA Energy. Together, these companies are increasingly shaping up supply and distribution dynamics on the continent as consumption rises.

Meanwhile, the sector’s operating environment continues to be marked by several trends that will affect performances and strategies moving forward.

A major one, particular to Africa, is the small size of the continent’s refining industry. Small, old and uncommercial refining facilities continue to make most African markets net importers of petroleum products. While Africa’s refining capacity stagnates, the continent’s demand and consumption for petroleum products keeps increasing at some of the world’s fastest rates, which in turn affect supply dynamics for oil marketers and the demand for storage infrastructure.

The second major trend affecting the sector is that of decarbonisation. Oil marketers are increasingly embracing sustainability, leading to the diversification of the energy supplied to African retail and commercial customers.

Beyond the ongoing solarisation of several retail stations on the continent, oil marketers are also diversifying their offering to offer clean energy products and hybrid solutions to their commercial clients.

Natural gas products, especially LPG and CNG, are notably expected to witness to most significant growth in Africa during the 2020 – 2030 decade. The demand for clean cooking fuels in Africa is notably growing by double-digit figures as governments incentivise the switch to clean cooking for public health and environmental reasons.

Titled “Petroleum Products’ Distribution in Africa: the Emergence of the Big 4,” the report is now available for all users of the Hawilti+ research terminal.

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