Traders Continue to Invest in Africa

Guillaume Quiviger, Senior Investment Manager of Vitol, talks about how low oil prices and market volatility impacted the oil and gas trading sector in recent years, as well as opportunities for traders throughout the value chain.

Many traders recorded record profits in recent years, during a period of low prices and price volatility. What factors contributed to the success of traders?

As a physical trader, the absolute price of oil is not so relevant, what matters is market structure, arbitrage opportunities and commercial opportunities arising from the lower oil price, where we are able to use the strength of our balance sheet and market position to offer financing solutions.

The trend you’ve seen in recent years — and we expect to see a continuation of this trend in the next few years — is the continued investment in infrastructure by companies like us. In Africa, for example, we bought Shell’s downstream business, we have continued growing the retail network and we have recently invested in more retail in Nigeria. We continue scanning for downstream opportunities in Africa, and given the infrastructure requirements of the continent, we expect to see people like us continuing to invest in Africa.

Traders are involved throughout the energy sector, from the upstream to the downstream. How do you determine what will be a worthwhile investment for your sector?

Traders operating in all the sectors is not a new trend. For us, whenever we look to acquire an asset there are two things we look for: First, that the asset is a sound business with adequate returns, and secondly that it complements the core trading business through supply or offtake rights.

Africa’s lack of midstream and downstream infrastructure puts the continent at a competitive disadvantage. From the trader’s standpoint, what projects are needed most urgently and how can traders facilitate their development?

There are two types of infrastructure we see a great need for, and they are complementary.
First, if you look at the consumer side, Africa needs power, so power infrastructure and power generation is a top priority. We are already supporting a number of power projects. In Ghana, for instance, we are involved in procuring the fuel to a number of IPPs, often building and operating their fuel infrastructure. We are also partnering with GE to build more power infrastructure. Throughout the continent, we are looking at opportunities to support and invest in power projects.

The second type of infrastructure that is greatly needed is gas import infrastructure. Africa has gas export facilities in Angola, Nigeria, Algeria or Egypt for instance. However, given the anticipated demand for power, more gas import facilities will be required. We are looking at building up the gas infrastructure in a number of countries, both for retail consumers and the power sector. In that regard, we see LPG as a very attractive fuel. Retail consumers in Africa are still primarily using biofuels to meet their domestic needs, with all the negative health impact such fuel creates — we are talking about using dung, wood and other materials that expose consumers to toxic fumes. We are trying to move people to LPG, which is a cleaner energy and greatly contribute to reducing deforestation.

These days, we are having conversations across West Africa, in countries like Equatorial Guinea, Senegal, Ghana, Nigeria and the Ivory Coast about the potential for LPG. More dedicated infrastructure will be required and we are looking forward to helping build it.

Guillaume Quiviger, Senior Investment Manager, Vitol

Guillaume is a Senior Investment Manager in the London office of Vitol. Since joining the Firm in 2014, he has been a member of Vitol’s global investment and origination team. His work focuses on gas and power infrastructure, primarily in Africa and Europe. Prior to joining Vitol, Guillaume was a Partner at McKinsey & Company where he led their Capital Project Practice in the Middle East.

Prior to Vitol and McKinsey, Guillaume worked as an engineer with Schlumberger in Texas. Guillaume graduated from the Massachusetts Institute of Technology with High Honors, and holds an MSc from the École normale supérieure in Paris.