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Singapore giant Petredec invests in South Africa’s fuel sector

Singapore giant Petredec invests in South Africa’s fuel sector
Petrefuel was formed after Petredec acquired the Jubane Petroleum and Oilco wholesale businesses in 2019 and 2020. (Photo: Supplied)

South Africa’s liquid fuels sector is quietly changing as more players enter the market, liquefied petroleum gas gains more market share and the oil majors relinquish control of non-core aspects of the trade.

Singapore-based Petredec, one of the world’s biggest traders, providers and distributors of liquefied petroleum gas (LPG), has acquired Quest Petroleum, a fuels distributor and retailer in the Eastern Cape.

This is Petredec’s third acquisition in South Africa’s liquid fuels and gas sector in the last 18 months. In addition, the group partnered with Bidvest Tank Terminals to build a R1-billion LPG storage facility at Richards Bay, which was commissioned last October.

According to Lee Furby, MD of Petredec SA, the group sees potential for growth in South Africa and the region. This is despite the poor state of SA’s economy and the fact that energy demand from the transport sector is expected to grow at less than half the rate of the previous 20 years, as improvements in vehicle efficiency accelerate. 

“It is all in the strategy. Our intention is to create a balanced portfolio of wholesale, commercial and retail businesses across the fuel and LPG sector and expand this across South Africa. You won’t see us building a retail site on Rivonia Road, which is overtraded, but you will see us investing in areas where there is less infrastructure and where competition is needed.”

Petredec SA operates two subsidiary companies, Petrefuel and Petregaz. 

Petregaz was formed following the acquisition of 50% LPG import and wholesale business Camel Fuels in March 2019, with a further 24% acquired in September 2020. The business distributes products across sub-Saharan Africa and up into Democratic Republic of Congo.

Petrefuel was formed after Petredec acquired the Jubane Petroleum and Oilco wholesale businesses in 2019 and 2020. The addition of Quest to the portfolio expands Petrefuel’s geographic coverage beyond KwaZulu-Natal and sees Petredec take its first steps into non-fuels retailing. It plans to follow in the geographic footprints set by its sister company.

Quest was founded in 2005 and began operations by distributing lubricants in the Gqeberha (Port Elizabeth) area, before entering the fuels market in 2007 to distribute diesel, petrol, illuminating paraffin and LPG across the Eastern Cape and Free State. 

Besides an extensive customer base in the wholesale sector, the business also supplies a network of some 80 Quest-branded service stations and operates its own chain of convenience stores under the EZEE Exprez brand.

The Petroleum Products Act prohibits vertical integration across the fuel chain, in a bid to maintain the sustainability and integrity of the system. It means that wholesalers cannot also be retailers. While Petrefuel has a licence to wholesale fuel products, it will not be contravening regulations with the acquisition of Quest. 

“We don’t actually own the retail entities,” says Furby. “They are owned by third parties, who are supplied by us as Petrefuel. We sign an agreement with them for supply, which includes the right to use the Quest brand. In return, we will use our expertise to assist the site owner in setting up the shop and other services.”

South Africa pumps more petrol than any other country on the continent – roughly 12 billion litres per year – through a network of wholesalers and almost 5,000 retailers, according to the Department of Energy. Diesel isn’t far behind. 

While there are profits to be made, the market is heavily regulated, highly taxed and very competitive. Competitors include the oil majors – Engen, Shell, Total, Caltex, BP and Sasol – as well as a growing number of independent operators. 

Fuel stations are starting to diversify, which means there’s potential to add other income streams to your business. 

“We see value on the retail side of non-fuel products,” says Furby. “Your margins in your shop are higher than in fuel and these profits can be a good supplement to the fuel business.”

The bottom line is scale, a lesson Petredec learned in its LPG business. Prior to its investment in its 22,500-ton storage facility in Richards Bay, it operated a 3,500-ton facility, which is tiny considering that the smallest VLGC ship (very large gas carrier) disgorges some 38,000 tons of LPG. Dedicated 24-hour road tanker and railcar loading facilities ensure the gas is swiftly transported throughout southern Africa.

The parent company remains acquisitive. 

“Petredec has a strong balance sheet and is highly supportive of the SA subsidiary,” says Furby. “We will continue to grow organically and by acquisition.” DM/BM

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