April 25, 2018
LONDON: Total is exploring options to enter Saudi Arabia’s petrol station market in conjunction with Saudi Aramco, as international interest in the Kingdom’s fuel distribution sector hots up.
A spokesman for the French energy major told Arab News that “several possibilities (are) under evaluation” for entering the sector, following the signature of an MoU with Aramco earlier this month “to evaluate the feasibility of jointly acquiring a retail service station network in Saudi Arabia.”
Bloomberg reported yesterday that the two firms are considering jointly acquiring Tas’helat Marketing Company, which operates petrol stations in the Kingdom under the “Sahel” brand, citing people with knowledge of the matter.
The Total spokesman declined to comment on the report.
Aramco is the sole distributor to Saudi Arabia’s petrol stations, but has no stations of its own, despite announcing plans to enter the sector in 2014.
Total and Aramco’s evaluation of the sector follows an uptick in interest from regional distributors.
Dubai-based ENOC in February opened what it described what it described as Saudi Arabia’s largest petrol station in the Modon industrial area of Riyadh, its 10th in the Kingdom. The company said at the time it planned to open further distribution facilities in the country later this year, giving no further details.
Abu Dhabi’s ADNOC Distribution meanwhile plans to open its first petrol station in Saudi Arabia later this year, following the award of an operating license last week.
Expansion into Saudi Arabia is a key strategic initiative of the fuel retailer, which operates nationwide in the UAE apart from in Dubai, and contributed to the success of its IPO on the Abu Dhabi stock market at the end of last year.
But a big play into the sector by Total and Aramco may well disrupt ADNOC Distributions plans, analysts have cautioned.
“In the pre-IPO presentation, ADNOC Distribution did not provide sufficient details for analysts to work in the potential for (Saudi operations) into their models,” Sanyalak Manibhandu, head of research at FAB Securities, told Arab News.
“Much was made of the potential of improving the standard of KSA service stations. If Aramco/Total are really going to compete on the service station forecourt and the adjacent grocery store, the potential will not be so good for competitors.”
Oman Oil Marketing Company earlier this month announced plans for a petrol station in Saudi Arabia, its first outside the Sultanate, after receiving an operating license in the Kingdom in 2015.
BMI Research last month forecast that Saudi car sales will rise by 4 percent in 2018, after having fallen by over 20 percent in 2016 and 2017.
But last year’s lifting of a ban on female drivers will have only a moderate impact on the market, the research firm said, coming into effect only in June, with many families already owning cars for use by women but are currently driven by paid drivers.
The agreement by Total and Aramco to explore options in the fuel distribution sector was signed on April 10, alongside the signing of an MoU between the two firms to build a large petrochemical complex in Jubail, integrated downstream of Aramco’s SATORP refinery.
This article was first published by Arab News