National Oil sounds out oil majors for strategic partner deal

A National Oil branded petrol station. FILE PHOTO | NMG

The National Oil Corporation of Kenya (NOC) has reached out to the top three oil multinationals in the country as it steps up efforts to strike a deal with a strategic partner to boost its turnaround plan.

Correspondence seen by the Business Daily shows that NOC wrote to Vivo Energy, TotalEnergies Marketing Kenya and Rubis last week as the search for a non-equity strategic partner enters the homestretch.

The responses will set the stage for talks with any of the firms and a possible deal to be struck by the end of this month.

The oil marketer who clinches the deal is expected to inject at least Sh5 billion into NOC, helping it revamp the downstream business of the State-owned firm in a bid to end its overreliance on the Treasury.

The market-sounding exercise is aimed at establishing if the top three marketers are keen to enter into a non-equity partnership with NOC. This follows the Cabinet’s approval for the revival and commercialisation of the firms, with the partner expected to inject working capital and cash to upgrade the stations.

"We sent out RSP (request for partnership) to the companies as part of our market-sounding survey to pick the best partner. We expect responses, then we will go to the next step. Remember there is a deadline at the end of this month,” said a source who sought anonymity.

NOC had been given up until the end of last month to onboard an oil marketer who would pump billions of shillings into the firm, but the deadline was pushed to the end of October amid delays from the Treasury to give the corporation a go-ahead for the deal.

Vivo Energy is the market leader in Kenya with a share of 22 percent as at December last year, followed by TotalEnergies Marketing at 16.39 percent and Rubis (10 percent).

The oil major who enters into the pact with NOC will significantly boost its share in the local market, making the deal significant at a time the three marketers are caught in cut-throat competition for customers.

Vivo Energy, TotalEnergies Marketing and Rubis have in recent years intensified efforts to open new stations in major towns and along key highways as they seek to grow numbers and revenues.

NOC has been unable to keep pace with the trio due to cash-flow hitches and reduced allocations from the Treasury that nearly forced the firm to close.

At its peak, NOC had a retail footprint of 110 service stations that included 13 stations acquired from BP in 2009 and 33 stations from Somken a year later.

Years of perennial struggles and losses hit NOC’s competitiveness, cutting its market share to a paltry 2.2 percent as at December last year.

The Cabinet sanctioned the new deal in response to the Treasury's request to cut taxpayer funding of NOC.

NOC is in a precarious financial situation, with current liabilities for the year ended June 2021 having exceeded current assets by Sh6.3 billion, rendering the firm technically insolvent.

NOC’s deal comes barely a month after Vivo Energy entered into a retail supply agreement with Lexo Energy, a move that offers the oil multinational a chance to further grow its dominance.

Vivo Energy is rebranding Lexo Energy’s stations, saying that the two are just entering into a "retail supply agreement", as Vivo Energy downplayed talk of a possible acquisition of Lexo Energy.

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