Motasim El Alem has been in the game long enough to avoid making knee-jerk reactions or outlandish predictions. The American-educated Libyan leads strategy at OLA Energy (previously Oil Libya), a company that has transformed in recent years into a major petroleum distributor operating in 17 countries and at 60 African airports.
Its business has traditionally been in retail stations, servicing cars, trucks and airline carriers with their fuel needs. The downstream and retail space has traditionally been led by international oil companies such as BP, Shell and Exxon. But as El Alem explains, the majors have been retreating from the retail space for many years now, and not only in Africa – “If you look at America, 1% of gas stations are owned by the majors.”
The margins are much smaller, he explains: “The big money is in the exploration, a little less money in the refining, even less in the logistics, and finally peanuts on the distribution side.”
It is on these peanuts (and more) that OLA Energy is focusing its efforts and where it is investing aggressively, largely because the firm sees the market evolving differently. Since a rebranding of the company in 2018, the company has invested more than $200m into the retail brand and into its growth on the continent. With 1,280 retail stations, it is today among the “Big 4” Africa retailers, alongside Total, Shell/Vivo and Engen.
El Alem sees a gap in the market for a more sophisticated and diverse retail experience at gas stations than that provided by the retreating majors.
Yet challenges are on the horizon for the downstream oil and gas sectors, particularly in the long-expected move away from fossil fuel consumption. How does this impact the long-term viability of OLA’s business model?
El Alem believes Africa will no longer depend on second-hand cars from abroad for its automobile needs and that there will be a large increase in two- and three-wheel modes of transport on the continent as well as small vehicles for distribution of light cargo, many of which will ultimately be electric powered. Yet he believes that offering roadside charging stations combined with a compelling retail experience will continue to be appealing to road users across the continent.
The rebranding from Oil Libya reflects the new reality of a world slowly turning its back on fossil fuels. El Alem says the company is embracing the zero-carbon strategy endorsed by governments, including by using solar panels to power its retail outlets.
The firm is also looking at offering off-grid renewable power solutions to companies operating in remote locations. The pilot they are running is for a mining company. El Alem describes what makes the firm’s proposition unique: “To amortise such a solution requires 20-25 years, whilst a mining project would require power for six or seven years or the length of the concession. We can afford to invest in the installation, charge [the company] as if it was being used for a 25-year life, allow them to use it for five years and then move [the installation] to another customer.”
Opportunities in LPG
Another business OLA is developing is liquefied petroleum gas (LPG), which El Alem says will help to reduce emissions in the medium term.
“A large portion of the African population, 70% I believe, use biomass to cook these days. This is terrible for the environment, it’s terrible for people who are around it, and actually it’s not cheap. The best alternative for nine-tenths of those using biomass is to use LPG. It’s cheaper, cleaner and once you deliver it to the home, it’s by far the best alternative.”
In Cameroon, OLA offers the possibility of ordering canisters via an app. They are exploring different options such as LPG terminals and filling centres, both in urban and widely populated rural areas with the aim of rolling out LPG through West Africa and beyond.
“In North Africa, because of the availability of LPG, they consume about 50kg of gas per person per year, and this applies for 50% of the total population. In sub-Saharan Africa, that is closer to 5kg per year, and that applies to only 10% of the population, if that. So there’s an opportunity there, to grow the market, as well as reduce harmful emissions.”
Today, after Total and Shell, OLA has the largest retail network in Africa, and El Alem says the firm will continue to invest heavily in a physical presence across the continent. This wide footprint and network gives them a strategic advantage to develop new products and offerings, he says.
“If you use it properly, if you leverage this with bringing new products and new solutions to Africa, then I think we’re incredibly strategic.”