HUUB STOKMAN is the CEO of OVH Energy Marketing Ltd. Stokman is a Dutch national with over 20 years of international experience in the oil and gas industry, overseeing sales and marketing businesses and various international projects. In this interview with FRANK UZUEGBUNAM, Stokman shares his insights into the downstream sector of the Nigerian oil and gas industry, his vision for OVH, Nigeria’s quest for economic diversification amongst other issues. Excerpts:
Let’s start with a brief peep into your background and what you do
I am the CEO of OVH Energy Marketing Ltd. Most people are probably familiar with OVH Energy for its Oando retail stations, however, we also operate a midstream jetty through which we receive petroleum product vessels in Apapa, Lagos. I am a Dutch National and have over 20 years of international experience in the oil and gas industry, overseeing sales and marketing businesses and various international projects. Prior to my appointment with OVH Energy, I was the head of Puma Energy in Angola responsible for the entire operation, which included: the retail business, storage, distribution of fuel via its own fleet, aviation business, lubricants, and B2B.
How long have you been with OVH Energy?
I have been with OVH Energy Marketing for 9 months. I started in February 2018 and it is has been a wonderful journey so far. I have felt warmly welcomed, not just by the OVH Energy team, but also by our various stakeholders, customers and the communities within which we operate.
So in your few months in Nigeria, do you see the country as quite phenomenal?
Whenever people think about Africa, Nigeria is one of the countries that comes to mind. This is not as a result of its population, even though it is Africa’s most populous country, but because of its potential. The people are also spectacular, besides the high number of well-educated people, Nigerians also have a drive to succeed. Even with all its economic and social challenges, Nigeria is one of the power houses of the continent.
How will you describe your business in OVH Energy Marketing?
We are a traditional downstream company, bringing fuel into the country through PPMC, own imports mainly via our jetty in Apapa or loaded fuel products from the onshore depots. We have depots in Apapa, Lagos and in Port Harcourt. We also distribute to our customers using a fleet of over one thousand trucks, which are handled by well-trained drivers who follow the best international operational standards. These trucks enable us to deliver products to different parts of the country to our end users, the retail sites, B2B customers, aviation and LPG customers. As a business we enjoy a strong heritage through our three shareholders who have all demonstrated success in their own right, thereby inspiring us to keep improving. Our shareholders are: Oando, who provides us with the retail brand license, Vitol a leading and well-known global petroleum trading company and Helios Investment partners, an African-focused Nigerian investment company.
Talking about your heritage, how have you been able to manage the transition from Oando to OVH Energy Marketing?
Earlier this year, we commissioned a brand market research project with the marketing department to ascertain the strength of the Oando brand and I am delighted to say that Oando retail is a well-loved and trusted brand, with a good reputation for quality as our consumers are assured of receiving value for money. Research indicates consumers ranked Oando as one of the top three downstream oil and gas brands in Nigeria. While we have changed to OVH Energy Marketing, we still retain the Oando name as our retail brand as it gives us continuity. We are able to continue the relationship we have with our customers, while being able to provide a variety of services. In OVH Energy, we consistently explore new ways and strategies to enhance our retail networks and other businesses. For example, we are planning to inject more LPG cylinders into the market to further facilitate the conversion of firewood to LPG use.
Is OVH Energy still driving retail expansion?
Yes, we have a robust retail expansion plan to extend our footprint across areas which we have evaluated as having market potential to bring the brand closer to the consumers. We will continue to invest directly and also in partnership with franchise operators. In 2019, we aim to grow our retail footprint by more than 20 high volume stations, ultimately growing the entire network to over 500 sites over a 5 year period. It is also our priority to continue the process of brand image refresh of our existing retail stations, in order to improve the ‘look and feel’ and offer additional non-fuel products and services.
Are there any similarities in the downstream operations between Angola and Nigeria?
Downstream oil and gas businesses in Angola and Nigeria have some similar characteristics and a few differences. Both Nigeria and Angola are blessed with abundant natural resources and fertile land to sustain its growth and development. Much like Nigeria, Angola is dependent on imported goods to satisfy consumer desires. In terms of the downstream petroleum business, Angola has a much smaller population compared to that of Nigeria, so distribution of fuel is easier as there are fewer road networks to ply and less retail sites (about 900 fuel retail sites when compared to the over 22,000 fuel retail sites in Nigeria). The entire distribution system is different. Also, the industry margins on products in Angola are healthier, which paved the way for more investments such as depot infrastructures. For example, while I was in Angola, we invested close to $300 million to complete a new import depot. These investments only occur where businesses get a margin to work with that can provide a healthy return on investment.
In the downstream sector, Nigeria has one of the lowest margins available to marketing businesses when compared to other countries in which I have worked. This situation presents a challenge to securing much needed investments in infrastructure, guaranteeing security of supply, safe storage and delivery of products to end destinations. This is why the Major Oil Marketers Association of Nigeria (MOMAN), which we are a member of has been advocating for deregulation as a means of attracting continuous investment in this industry, to maintain and in some cases expand infrastructure, which helps ensure sustainability and long term benefits to the consuming public. We invested heavily in our mid-stream Jetty with the intention of reducing demurrage and lightering cost (cost to bring products into the country) to the industry.
Can you compare the downstream sector in Togo, Ghana with Nigeria?
In markets where margins are depressed, the share volume of products required and distributed in such environments can make up for low margins. The market in Togo has better margins, but the product volume is small and as such, requires a completely different mode of operation. Therefore, the logical approach is to optimize the few locations available as the market alone cannot sustain more sites. Although their margins are slightly better per litre, the total market is small and does not really differ from Nigeria, which has a larger market if you take an overall view. Ghana, however, is known to have a decent margin, infrastructure and it is organized differently from a value perspective, hence comparing Ghana and Nigeria is not easy.
What is your opinion on the recent topic of diversifying the Nigerian economy?
Economic diversification is important for the growth and sustainability of any nation. Unfortunately, the economies of a number of African countries are dependent on the exploration of natural resources. The problem here is with over-dependence on a particular resource or a commodity for which pricing is completely outside of one’s control. A country’s economy is at the mercy of unpredictable market conditions, which lead to international price fluctuations, a risk that makes it difficult for any government to plan successfully for the long-term. Natural resources are important, however the focus should be on diversifying the economy for these two reasons: Natural resources are finite. It may take a significant length of time to reach point of exhaustion, however a time will come when these resources are significantly depleted and no longer available to make an economic impact; In terms of sustainability, the more options available to you, the easier it is to sustain economic growth; be it for example in manufacturing or agriculture.
For these reasons, I believe that diversification is a key element of any policy that Nigeria should have for the future.
How do you assess Nigerians’ appetite for investment in oil and gas?
There is always the need to invest in oil and gas. If you look at the upstream sector, it has a very clear investment reward profile even with the uncertainty in prices. From an investment perspective, any investment in gas is commendable, as you see a large shift in the world economic energy demands from oil to gas. Looking at the downstream sector, and using the investment of Vitol and Helios as a case study, the investments made in the downstream business in Nigeria and across other African countries, suggests that opportunities are available to secure healthy returns on investments. Some uncertainties evident in the industry include the question on the direction of deregulation in the industry. Looking at it from an economical point of view, a country with a population of over 190 million people will always need energy and with the right investments, we can capitalize on this need and ensure the realization of its growth.
What role do you think the government can play in supporting investment in the oil and gas sector?
There are several ways the government can aid investment in the oil and gas industry, and not only oil and gas, any sector of the economy, especially if there is an objective of diversifying of the economy. A major approach is to strengthen regulations and laws to help local and international companies invest and guarantee a healthy return on their investments. There is also the need to provide enduring infrastructure to aid movement of various products either for imports and local distribution or export for foreign exchange earnings. Such infrastructure include good road networks, railways, fully functional harbors or ports so the vast water ways can be exploited to move goods in and out of the country. Governments can also explore public-private partnerships to support the above.
In summary, governments can aid investment with good legislation and infrastructure. With this must come investments in public education to bridge the knowledge gap in running the operations of a diversified economy as compared to the skills required of a mono product dependent-economy. Long term, no economy can depend on expatriates providing the technical know-how, their role is to transfer the knowledge to local staff to run the organisation and economy themselves. For example, my role here is to share the knowledge, which I have gathered over the years, allowing my colleagues to ‘see, learn and apply’.
Looking at the way downstream is structured in Nigeria, how do you deal with volatility of crude oil prices in international market?
There are two ways volatility expresses itself in our business, eliciting the following corresponding questions: The first is; do you have the product available and can you do the business? The second is; how does the pricing work? Can you achieve a healthy margin?
From this, you need to build a company that can withstand challenges of all seasons and is flexible in the way it operates its business from a cost, investment and process point of view. The company should be dynamic and able to contract and expand under these conditions, which is common with other countries in the world. They all have periods when margins are slightly better and when they are worse, where there is an abundance of products and scarcity of products. Nigeria is not unique in this regard. What makes a company more sustainable today, is their ability to work within these situations. We can achieve this with the right people, finding new avenues to increase income; like new markets, new products or introducing new innovations to customers at various touch points, ensuring our organization is fit for all purposes and finding new opportunities for growth.
Considering the kind of products you handle, please tell us a little about your Health, Safety and Environment (HSE) standard.
We have recently been re-certified by SON for ISO 9001:2015 and ISO 14001:2015 and OSHAS 18001:2007. These certifications are measuring systems that exhibit how we deal with health, safety and environment risks, how we work through a quality process to ensure customer satisfaction. The certification highlights the workplace safety environment and they are supporting systems to achieve a mindset. I have always held the view that Health and Safety is not just a mirror of the mind, it is also a mirror of the heart, because you can put all the systems and procedures in place, you can make it very bureaucratic and measure every dot, but people must see the need to act safely. They need to be able to stop themselves or their colleagues from carrying out activities that might create risks. Procedures and training are fundamental in ensuring the persistent application of the way work is carried out, at the end of the day, the individual hugely determines if work is carried out safely. Here at OVH Energy Marketing, besides ensuring that safety is embedded in our culture, we support this with actions such as safety training, truck audits, driver training and investments in our sites, protecting the environment by installing solar panels; we have quality laboratories in our depots for fuel and at our lubricant blending plants. What we concluded from the results of our brand market research, is that we are well known for the ‘quality of our products’ and we would like to keep it that way.
Are you making any investment in the CSR area?
At OVH Energy, we continually demonstrate our investment in innovative corporate social responsibility initiatives and community projects to support our partners and provide relief to members of our host communities.
We founded the Oleum Academy as a technical skills enhancement programme for mechanics, where we train and equip them with modern automotive diagnostics skills and tools to enable them efficiently manage the diagnosis and repair of the 21st century automotive brands. We run an all-inclusive programme, where participants are drawn from all regions in Nigeria to foster a sense of belonging for all.
To date, we have trained approximately 3,000 mechanics across the country in general car lubrication and automotive training, whilst 1,300 mechanics have participated in the advanced car diagnostics training to ensure accurate diagnosis of faults, which ensures safety of both car and passengers. We have also created a financial empowerment programme called Project MORE (Mechanic Oleum Reseller Enterprise) initiative, where they are appointed as resellers of our Oleum lubricants within mechanic villages, to provide additional income stream for these mechanics.
We provide gas-powered industrial cooking stoves to local restaurants, popularly called “Bukkas” or “Mama-puts”, to switch them from using unhealthy cooking options such as firewood. To date, we have switched over 40 soup kitchens. Through our collaborative efforts with stakeholders and our distribution channels, we have been able to inject over 500,000 cylinders into the Nigerian LPG Market in demonstration of our competence and capacity in that space.
To demonstrate our commitment to supporting a healthier and cleaner community, we have deployed a number of initiatives to positively impact communities around us. In 2017 and mid-2018, we ran the Roll-Back Malaria Campaigns in Apapa, Lagos and in Onne, Rivers State, which involved the distribution of mosquito-treated nets, malaria prevention talks and malaria screening exercises. In September this year, we organised an awareness campaign on Lassa Fever with the Orisumbare and Marine Beach communities in Apapa, Lagos and actively providing support with rat eradication.
Furthermore, we have granted scholarships to university undergraduates in both Elikaya, Port Harcourt and we also have plans to expand the programme to Lagos.
We have implemented specific and need-based vocational skills acquisition programme for youths within our host communities on the art of painting and decoration.
To raise the level of impact in tackling health related challenges, we are engaged in discussions with Endfund, a global fund initiative that supports the prevention of non-tropical diseases across Africa and how to tackle and provide support in this regard.
We adopt a proactive approach to executing community development projects in our host communities, this enables us to ensure that these projects are most beneficial to the communities in which we operate.
Where do you see OVH Energy 5 years from now?
In the next 5 years, I see OVH Energy Marketing as the trusted marketer of choice, providing petroleum services to the Nigerian market. From a consumer’s point of view, this means that if people think about OVH Energy, they think about a great brand that offers quality products and services, a company that provides convenience to customers, which is the preferred brand of choice. I also hope that by that time, the industry is fully deregulated because I truly believe that it is the right decision for Nigeria and its future success.
Tags: Oil and Gas
, OVH Energy