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Thread: Petroleum Industry business

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    Petroleum Industry business

    Hi All,

    Just a thought on something I observed in the petroleum industry and how it works
    We have the "oil majors" who are also refineries ..the likes of Total, BP,Shell,Engem,Sasol and PetroSA
    Then we have wholesellers or distributors, that is every other business that deals in petroleum products but is not a refinery

    Now, both the oil majors and wholesellers looking to sell to either commercial customers (mines and big industries) and other end users
    but, then the wholesellers must still try and secure/ get product from the sale refineries that they will compete with to sell to customers
    And, historical evidence proves that the oil majors will give the whollesellers prices that will then make it difficult for wholesellers to compete in the industry
    Also, during shut downs..either planned or not, the majors simple cut out the wholesellers and that means wholesellers lose business
    That in turns means the wholesellers end customers will now try and sorce directly from the majors, cutting out the whollesellers even further

    To me, it seems this prcatice is clearly not appropriate
    And, I know someone may say...why don't thewholesellers import product into SA?
    Answer is simple, they can NOT. There is no storage in SA, where will they put product? And even if there was, the oil majors control the pipe line from durban, so even if you do import and get storage (by whatever miracle), they you can not bring product inland on pipeline still
    And remember the storage is not accessable by truck,

    What can be done on this matter?

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    Site Caretaker Dave A's Avatar
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    Are we talking about protecting "wholesalers" for main stream commodity products such as petrol and diesel, or are we talking about speciality petrochemical products?

    I don't know the industry well at all, but I would expect targetting petrol and diesel would not be smart as how are you going to find that niche or USP that gives you a competitive edge in such a mainstream commodity item. I expect the niches open to smaller players will lie in speciality products...

    Any small operator competing within an industry dominated by big boys has to find a niche that is open for them to compete. If you want to go head to head on the bread and butter commodities - it's a big money game and there's no use crying foul when essentially the real problem is your pockets aren't deep enough to play.
    The trouble with opportunity is it normally comes dressed up as work.

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    Yes Dave, we talking petrol & diesel
    But Dave..we know very well that the historical effect of the matter is that only the oil majors were allowed to have such facilities
    And now, even if any other business can get a wholesale licence, it can not get a refinery licence
    This means the oil majors have a double edge sword..refinery and wholesale licence. And, ownership to the infrustructure such as pipeline and storage
    Even if anyother person wanted to invest there, there are no options as no "new" structures in gazetted in the country

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    Fully agree, authorities need to be engaged..problem is how do you get them to reason on the matter when they have no insight and experience how things work in reality in the i
    industry? And some people sitting in the boards of the majors are politically connected

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    Site Caretaker Dave A's Avatar
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    Have these wholesalers invested in their own storage facilities?
    The trouble with opportunity is it normally comes dressed up as work.

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    I think Dave has provided the answer. Your pockets are not deep enough. You can not claim the same benefits as the big dogs who have invested billions in the industry over many decades.

    If you had the billions required, would you risk investing in this industry and would you have the patience to wait decades for an equitable return?

    As Dave suggested, do not tackle the big boys head on, rather look for a niche market or service where you can operate profitably. The alternative is to rather invest in another industry.
    Excellence is not a skill; its an attitude...

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    There is no storage places in SA, even if one has investors. Vessels come into Durban SBM thats the only place to offload imports and as such storage should be there
    And there is no space as all the land is already occupied by the oil majors
    What then?

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    Quote Originally Posted by SSS100 View Post
    And there is no space as all the land is already occupied by the oil majors
    What then?
    Then it sounds like there is no opportunity to exploit there - look for another option.

    ps. It's not all occupied by the oil majors. One of the private tank farms there is a client...
    The trouble with opportunity is it normally comes dressed up as work.

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    Probelm Dave is that the majors own the product as they are the refineries, and they are also selling to the same tank farmer I would also go to
    And being the refinery, and I still have to buy from them..they will be able to offer cheaper prices

    What I'm getting to is..why let them be on both sides?

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    Site Caretaker Dave A's Avatar
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    My best suggestion right now is to read Sun Tzu's The Art of War. I'd look for a translation by Gagliardi where he relates the original text to business strategy.
    The trouble with opportunity is it normally comes dressed up as work.

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