Ideas & Debate

Why oil brands are exiting Kenya as others come in


Motorist trust is mainly driven by perceived expectation that a brand will serve quality fuel. FILE PHOTO | NMG

The face of petroleum brands in Kenya has significantly changed and continues to change. The main influence has been the multinational oil companies mergers and acquisitions, and also corporate asset restructuring which invariably impact their Kenyan affiliates

Global companies have also often considered Africa, or indeed Kenya, as not meeting their minimum standards— business environment, fair competition, adequacy of return on investments —prompting selective market withdrawal. We have also witnessed major global petroleum commodity traders seeking entry into Africa by acquiring marketing assets as a supply chain outlet for their cargoes. .

When I entered the oil industry in 1970, there were seven multinational oil companies in Kenya (Shell, BP, Caltex, Esso, Total, Mobil, and Agip). Also present was a very insignificant local retailer called Kenol, principally owned by Sir Reggie Alexander, and which was supplied products by Caltex.

Of these original “seven sisters”, only Total today remains in Kenya as a truly multinational global oil company with all the resource and technology might of a fully integrated global company. Shell exists in Kenya only as a “brand” licensed to Vivo Energy which acquired Shell assets in Africa.

Notable brand changes started happening in early1980s, when President Moi was just settling in power. This coincided with a major USA/Iran conflict which led to oil prices escalating from $11 to a high of $35 per barrel, all within months. This triggered a global and local economic recession which severely impacted Kenya.

Hesitant to grant local price increases, the government created a crisis that made the oil companies uneasy to import oil. Seeing it as blackmail the government decided to form National Oil Corporation of Kenya (NOCK) with a mandate to import 30 percent of Kenyan petroleum requirements.

Kenol was the first victim of the Iranian oil price crisis as the company went into receivership in 1980 and stopped business. Mobil also decided to withdraw from Kenya. An Israeli named Gadi Zevi (linked to HZ Construction and Yaya Center) together with high political associates saw an opportunity. He bought Kenol out of receivership so as to partner with NOCK in the importation of the 30 percent statutory requirements. By 1982, Kenol was already supplying nearly all government accounts with oil.

In 1983 Zevi and associates bought the exiting Mobil and renamed it Kobil which they registered in Delaware (USA) as the offshore supplier of the 30 percent imports for NOCK through Kenol. Kenol and Kobil remained separate brands under one management until around 2007 when Kobil changed its domicile to Kenya; merged with Kenol; then listed as Kenol-Kobil at the NSE.

The Kenol-Kobil brand will soon disappear as the company is set to be acquired by Rubis, a French independent company with strong market presence in Europe. A case of Kenol-Kobil cashing in and closing a 38 years chapter.

The 1997 Asian financial crisis created a serious downturn for multinational oil companies, as oil prices dropped from US$25 to US$11 per barrel. This triggered a series of global mega-mergers and assets rationalisation which eventually saw Agip, Esso, Mobil, BP, Caltex and later Shell all exit Kenya leaving behind their global sister Total.

It is correct when we say that Total (a French firm) has a special affinity (and resilience!) for Africa and will likely be here for many years to come.

Libya Africa Investments Company (LAICO) ended up acquiring the prime Esso/Mobil retail and distribution assets under Oil-Libya brand which is currently rebranding to OLA (Oil Libya Africa). The company is understood to be owned by the Government of Libya.

The National Oil brand entered the retail market in late 1980s and is steadily increasing its market share. Since the oil industry was liberalised in mid 1990s, the Kenyan enterprises have created numerous marketing brands which are offering formidable competition to the older brands.

But what determines brand strength and effectiveness in the Kenyan oil sector?

With retail prices equalised by the energy regulator, the brand strength and consumer capture are mainly determined by perceived brand trust, and service.

And with the familiar fuels adulteration practices, motorist trust is mainly driven by perceived expectation that a brand will serve quality fuel.