The largest oil producer in the world, Saudi Aramco, plans to buy the local presence of US motor oil and lubricants company Valvoline in order to join the Kenyan market.
Aramco Overseas Company, the investment arm of Saudi Aramco, received approval from Kenya's Competition Authority (CAK) to purchase VGP Holdings' activities in Kenya as part of a $2.65 billion worldwide agreement.
The acquisition appears to be going to cause changes in Kenya's gasoline lubricants sector, which is now controlled by international corporations like Vivo, which sells products made by Shell, Total Energies, and Rubis.
With a market capitalization of $1.82 trillion, Saudi Aramco is the largest oil firm in the world and the second most valuable after Apple (Sh223.86 trillion). Apple has a $2.154 trillion market cap (Sh264.94 trillion).
According to a notification from CAK Director-General Wang'ombe Kariuki, "The Competition Authority of Kenya excludes the proposed purchase of ownership of VGP Holdings LLC by Aramco Overseas Company B.V from provisions of the Act."
Exclusion was granted on the basis that it won't damage competition and that the US motor oil and lubricants firm, with annual sales of Sh14.2 million in Kenya, is still modest.
The Aramco division is anticipated to target new markets, including as gasoline imports, and to increase its market share in Kenya's lubricants industry.
Saudi Aramco's activities in Europe, Asia, Australia, and Africa are supported by Aramco Overseas Company, although the Saudi Arabian and North American markets are not included.
Financial management, supply chain management, technical assistance, and other administrative services are all part of the support.
As a supplier of lubricants including brake fluids, gear oils, greases, and transmission fluids, Saudi Aramco's acquisition of Valvoline will provide it financial clout and a shareholder with a clear vision for Africa.
Due to their extensive network of retail stations around the nation, a few group of dealers, mostly the multinationals Vivo, Total Energies, and Rubis, control the local lubricants business.
According to statistics from the Petroleum Institute of East Africa (PIEA), lubricant use on the domestic market has increased over the past several years. Market competitors are competing to take advantage of the expanding demand.
According to PIEA data, lubricant usage increased 10.67% to 61, 602 tonnes in 2018 from 55, 662 tonnes in 2019.
The Saudi oil company, Saudi Aramco, initially announced its plans to purchase Valvoline Global for $2.65 billion in a deal that it claims would support its aspirations to build a larger distribution network.
Due to rising automobile ownership and a competitive industrial sector, lubricant consumption is expected to continue to climb.
Like its international rivals Shell and BP, Saudi Aramco has benefited greatly from the increase in crude prices throughout the world since the beginning of the year.
The company's net income increased to $39.5 billion (Sh4.85 trillion) in the first three months of the year, showing an 82% rise from a comparable period last year. This was the company's greatest quarterly profits since listing its shares in 2019.
The group's overall output, which now includes gas, increased from an average of 12.3 million barrels of oil equivalent per day to 13 million.
94.2 percent of Aramco is owned by the government of Saudi Arabia.
Saudi Arabia has more than 11,000 retail gas stations across the world, with some of them situated in China, South Korea, the US, and Japan.
It is yet unknown if Saudi Aramco will utilize the acquisition to enter the regional wholesale market for gasoline, which might lead to price decreases for oil marketers who would then pass the savings along to customers.
Months after Kenya, through the National Oil Corporation (Nock), asked the company for fuel supplies on credit, the contract represents Saudi Aramco's first direct engagement in the Kenyan fuel market.
However, the August General elections postponed the arrangement that would have provided Nock supplies to independent oil marketers in an effort to reduce the influence of the international businesses.