Heyden invests over N10b in downstream chain

Eyes refinery collocation

Heyden Oil and Gas said it has invested over N10billion in downstream retail chain, which involved acquiring and rebranding 40 filling stations in Lagos. This brings to 50, the total number of outlets in Lagos and Ogun states owned by the firm.

This is even as the company disclosed that it was considering available options to take advantage of Federal Government’s offer to private sectors on refinery collocation.

A number of Nigerian banks including Wema, Access and UBA provided the facility for the outlets acquisition, which it hoped to repay from the accruable margins from running the stations.

Speaking with journalists on the sidelines of the opening of one of the outlets at Alapere, Ketu, the Managing Director/Chief Executive, Dapo Abiodun, while admitting that the venture was expensive, said: “These are the easiest ways of penetrating the market.”

He said the company is not stopping on its oars as it also planned to expand operations “to Oyo, Osun, Ekiti, Edo, Kwara, FCT Abuja (which we are currently working on) and other parts of the country.”

Abiodun revealed that the investment in retail outlets is aimed at consolidating its wholesale and other downstream operations including petroleum products importation, tank farms, ships and distribution networks.

He said the essence of the partial deregulation of the petroleum downstream is to encourage more private sector investment.

“The deregulation by President Buhari is a great landmark. With the feat, it means that efficiency is what determines the margins. Dr. Ibe Kachikwu and Maikanti Baru, have said we are under retailed; in Victoria Island, there are only three fuel stations, and if there is a small tightness in the market, there will be queues everywhere. What NNPC did was to invest in retails by placing the most margins in retail,” he explained.

The Managing Director, Wema Bank, Segun Oloketuyi, said the bank participated in the funding of the outlets because it had faith in the retail business, saying it has been part of the success story from 10 years ago.

“The only to sustain the retail business is to integrate the system,” noting that prevalent challenges in the downstream sector are traceable to distortions in the system, he added.

On his part, Lagos State Commissioner for Finance, Ayo Gbeleyi, expressed excitement in the purchase of the 40 outlets, saying that it will generate more employment in the state, which will in turn mean more revenues for the state through the payment of income and consumption taxes.

He noted that making such a huge investment in a double digit inflation and high interest and foreign exchange rates environment is quite commendable, adding that this is part of the way to get Nigeria out of recession.

Agreeing, the Group Executive Director/Chief Operating Officer, Commercials, Nigerian National Petroleum Corporation (NNPC), Henry Obi, said it takes a brave heart to invest such a huge amount at this point in time, especially in the downstream sector, which impacts directly on the life of everyone in the society.

He noted that full integration is the only way to ensure success in the petroleum downstream to maximise profits along the value chain – terminals, trucking and retailing.

He commended President Buhari for taking the bold step to deregulate the sector, saying: “Given his concern for the poor Nigerians, it was not easy to convince him to deregulate because at every point of the discussion on deregulation, he will ask: ‘what will cushion the impact on the common man.’”

He reiterated that NNPC had a responsibility to protect investments, such as this in the downstream, adding that deregulation has changed the rules of the game, adding that “the environment will soon get tougher, as those who cannot paly according to the new rules will soon fall by the way side in the coming months.”

Regarding the outstanding over N300billion dollar equivalent owed oil marketers, Abiodun said operators are currently in discussion with the Ministry of Finance and the Central Bank of Nigeria (CBN) to grant them concessions concerning the differentials between the old rate of N195 to the new one of N305 to the dollar.