Ayham Ammora, the country chairman and area business manager for North Africa and the Levant at Chevron Egypt Lubricants, talks to TOGY about the advantages and challenges of manufacturing in Egypt and the demand factors influencing the Egyptian lubricants market. Chevron Egypt Lubricants manufactures lubricants, greases and fluids and is involved in exporting supplies to countries across the MENA region.
What are some of the demand factors for the lubricants market in Egypt? Is it mainly based on population growth?
The number one mega trend impacting demand growth for products and services is demographics. It is the primary engine of growth impacting urbanisation, consumerism, economic development, energy consumption and technological development, all of which require lubricants in one form or another.
Increased population growth will inevitably lead to the increased need for mobility, construction, telecommunications, power generation, agriculture and manufacturing. This, in turn, is projected to lead to an increase in lubricants demand in Egypt from nearly 3.1 million barrels per annum in 2015, to around 4.1 million barrels per annum in 2030, according to a number of reports.
The 4.1 million barrel per annum market in 2030 is expected to comprise 64% commercial, 15% retail and 21% industrial sectors. Our primary focus is on the commercial and industrial sectors in which Chevron commands a robust market share and will endeavour to increase its share of wallet.
As a local manufacturer, what are the advantages and challenges of manufacturing in Egypt from an international company’s perspective?
The advantages of manufacturing in Egypt could be summarised as flexibility and location. In terms of flexibility, we can control the quantity and quality of the products manufactured, which gives us the flexibility needed to capture growth opportunities in a highly fluid market. In terms of location, as exports make up a considerable portion of our portfolio, we benefit from the duty free trade agreements between Egypt and the remaining African continent on one side through COMESA and between Egypt and the remaining Middle Eastern Arabic countries on the other.
As for the challenges of working in Egypt, we are prone to fluctuations in currency. This impacts our imports of base oil and additives, which are all purchased in US dollars. The government has been working hard on stabilising the exchange rate. As for other policies, we would always welcome policies geared towards enhancing FDI such as reduced taxes, quicker Customs clearance procedures for raw material imports and export incentives.
How much of your products stay within Egypt and how much are exported to the region?
Egypt is the biggest market in Africa and is our number one priority. Our primary focus is on growing our market share in Egypt. Most of our locally manufactured products are sold in Egypt. We also import specialty products from our global supply-chain network spanning the USA, UK, Belgium, UAE, South Africa, Thailand, Singapore and China to meet the most technologically advanced products with the most demanding specifications for our most discerning customers in country.
As previously mentioned, the strategic location of Egypt and favourable regional export treaties makes it an optimal export hub for both Africa and the Middle East. We supply our export markets both from domestic production and our global supply chain network based on the most optimal supply dynamics to each location.
What have been Chevron Egypt Lubricants’ biggest achievements, milestones and contracts signed in 2015?
Chevron has had a long history in Egypt, dating back to 1937. We have exclusively operated in the downstream sector. Our operations comprise a large and diverse portfolio spanning over sixty fuel retail stations, marine bunkering, aviation fuels and lubricants, which has experienced a ten-fold growth in sales over the past ten years. In 2014, we converged those interests into lubricants only, where we see the most value. Currently, we own a substantial portion of the domestic market share.
In addition to the Egyptian domestic market, we also market lubricants in the top half of Africa and the Levant. We are therefore responsible for a large group of markets and supply those markets out of Cairo through a team of domestic and regional partners. 2015 represented the beginning of significant growth journey for us in which we cemented our partnerships with our three domestic regional distributors, Proserv, Shemy Oils and Arab Engineers, through whom we have ramped up our commercial sales and national coverage significantly.
We expanded our industrial product offering to include technically advanced products. We cemented our partnerships with many key players in energy, mining, construction and marine, which we supply directly. For example, we signed a long-term partnership agreement with one of the largest and most important upstream drilling companies in Egypt, Advanced Energy Systems (ADES), in November of last year.
In our export markets, we have experienced robust growth in those countries within our sphere of influence, notably in Ethiopia, Djibouti, Lebanon and Libya. We renewed our long-term partnership agreements with National Oil Ethiopia, the largest lubricants player in Ethiopia, and inaugurated National Oil Djibouti after acquiring Oil Libya in Djibouti. We cemented our 50+ year partnership with our Lebanese partner, Medco, one of the most influential players in the Levant. We have also ramped up our commercial activities in Libya and Algeria.
What is Chevron’s relationship with ADES?
ADES is one of our most important partners in the oil and gas industry. They are the fastest growing upstream drilling company in Egypt with ambitious growth plans within the Middle East. Additionally, Chevron is their exclusive supplier of lubricants.
We have recently cemented our partnership agreement with them through signing a three-year contract in November 2015, which will see our volumes rise substantially alongside their operational growth both domestically and abroad. We are also exploring further partnership opportunities with them within the Middle East.
Could you go more into detail on your in-country blending facilities?
We have a state-of-the-art lube oil blending plant in 6th October, Giza, where we manufacture a very diverse portfolio of lubricants in all of the pertinent unit sizes from 1L small plastic packs to 205L metal drums. This facility was established in 1995, and was one of the first within the global Chevron portfolio to attain the ISO 9001, 14001 and 18000 certifications. It is a highly automated facility to optimise productivity and operational excellence, run by a team of more than 60 skilled professionals.
Having such manufacturing capabilities in the most strategic location in Africa facilitates ready access to the whole of Africa and the Middle East, which include some of the largest and fastest growing markets in the world.
What is your plan for implementing Chevron Egypt Lubricants’ 2030 vision over the coming year?
We have short-term actions for 2016-2017 that will be game changers for Chevron Egypt Lubricants. Those include enhanced brand positioning, projects and partnerships. Those three key elements underpin our main strands for growth in 2016-2017 along that journey to market share prominence by 2030.
This new marketing strategy makes a lot of sense since you divested away from retail stations, which were your main store-front essentially.
Is there anything else you’d like to say regarding this market strategy?
We would like to use this opportunity to clear a misconception of how important retail stations are to lubricant sales. Retail stations are significant for brand awareness but insignificant with respect to actual lubricant sales, where only 3% of our sales volume was previously through retail stations.
We divested our network of 60 retail stations in Egypt as part of a global strategy of portfolio optimisation. However, we have since redoubled our efforts to strengthen our brand presence through a strong focused marketing strategy, through flagship express lube sites in key locations throughout the country.
(Source: The Oil & Gas Year)