Kenya: Essar Now Seeks to Enter Fuel Wholesale & Retail Business

                                                                                                                    People familiar with the deal said Essar, which has expressed interest in broadening its presence in Kenya’s petroleum market, is weighing a number of options including the acquisition of assets belonging to collapsed Triton Petroleum.  Triton, the petroleum dealer that collapsed under the weight of debt late last year, has more than 20 retail outlets as well as storage facilities in Mombasa offering Essar the easiest route to the distribution market.

A senior Ministry of Energy official confirmed that Essar had expressed interest in Triton assets, but added that negotiations had only began.  The entry of Essar, an Indian oil and gas conglomerate known for its low-cost petroleum distribution model, could result in major realignments in the marketplace. It could set the stage for more mergers and acquisitions as the main players fight to protect their market-share.

Holding the majority shareholder’s position at the refinery puts Essar in a position of  market strength. Srinivasa Iyingar, the CEO of Essar Kenya, said he was not aware of the development, but promised to give a detailed answer after consulting with the company’s Mumbai head office.

Kenya’s petroleum market has 29 major players and hundreds of independents.  The three private outgoing shareholders at the Kenya Petroleum Refinery Limited (KPRL) received $5 million (about Sh400 million) for their 50 per cent stake, setting the value of the refinery at Sh800 million.

Essar also paid $2 million to the Kenya government in exchange for a waiver of pre-emption rights at KPRL.A 2004 valuation report by Standard Chartered Plc, valued the refinery at between $40 million and $60 million (Sh3.6 billion and Sh4.3 billion).  Naresh Nayyar, the chief executive for Essar Energy, a subsidiary of Essar Group, told local media that the company would explore distribution and storage opportunities as well as presence in the retail market.  Essar Energy is a subsidiary of the Essar Group that also owns Essar Communications Holdings Ltd - the owners of Essar Kenya, the mobile firm that trades in Kenya under the brand name Yu.

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