With the entrance of international companies like Total breaking the Jordan Petroleum Refinery Company’s (JPRC) long-held monopoly, Jordan’s fuel market has undergone significant change over the past decade.
Increased competition has also led to substantial upgrade in the quality of services provided to customers at service stations across the Kingdom. A 2012 agreement between the Ministry of Energy, Total and Manaseer allowed the two companies to distribute fuel to more than 350 service stations alongside the JPRC.
Looking back at the past decade Total Jordan Managing Director Adil Ouriaghli said despite some obstacles they have faced in the limited local market, including small margins, his company’s investment here is for the long-term.
You entered the Jordanian market in 2007, and opened your first service station in 2009. How much have you invested so far and how satisfied are you with this investment?
We have invested a great deal of effort and over $150 million of capital expenditure as of 2015 year-end, mainly in retail network construction, and improvements and transportation through our partners. We intend to invest $200 million over the coming years in diversifying our energy offers, increasing our footprint in retail, in B2B, and in the supply chain through the import terminal project in Aqaba that we are carrying out with Manaseer. This strategic logistic project is currently under evaluation with operations expected to start by the end of 2018.
Investing in the downstream sector is a long-term journey, so for the time being, we have been consistently working on developing our retail network presence across the Kingdom. We are a customer-oriented business and our commercial performance is a tribute to service and safety standards that we are trying to raise for a better customer experience. We are proud to say that Total’s presence in Jordan set the momentum for the whole industry.
What are some of the main challenges you face in the Kingdom?
We have high expectations with regards to the government addressing key issues for the petroleum products distribution sector like margins revisions, regulation, and fair competition. The government will have to move forward on the logistics activity carve-out from the refining industry still run by JPRC. In fact, the license agreements signed with the government provided for a segregation of these activities as a major step towards the downstream sector liberalization. We have been informed of the legal creation of a new Jordanian logistics company, but assets have not yet been transferred to it and operations have not started.
The distribution margins are among the lowest in the region and the oil marketing companies are struggling with the low returns on their investments. We operate in a regulated market and the government committed to review the margins on a yearly basis but this hasn’t happened since we started back in May 2013.
Do you think the market should be opened up to even greater competition?
The Jordanian market is rather small in size and the existing number of actors is fairly adequate to cater for the market supply in a competitive manner. An oil marketing company needs to reach a critical size to be able to operate in a low-margin market such as Jordan, while maintaining discipline over operating costs. Again, customer focus is key in our industry where prices are regulated and the service is the key differentiator. Adding new players to the market will lead to a costly and lengthy consolidation process in order to reach that critical size again, often at the expense of the end consumer. However, we might see the emergence of sizeable dealers to consolidate service stations management and improve customer service.
Total is also seeking to invest in renewables in Jordan. What will this involve?
We have multiple ambitions in renewables in 20 years’ time. We want to be in the top three in solar power, expand in electricity trading and energy storage. Our ambition is to create a new business that will help make Total the responsible energy major.
Total Jordan will be the Total Group arm to invest in solar farms for industrial and commercial customers and utilities companies. Residential offers could also be developed depending on market conditions. We are currently installing solar panels in three of our stations. We will learn from this pilot phase how to transition into a full fledge solar power generation for the entire Total operated network and head-office. We aim to have at least 200 MW of solar power capacity in our portfolio within the next 10 years. Total Jordan will prepare to offer its customers energy mix solutions, including fossil fuel and renewable energy sources, hybrid and decentralized systems with batteries for energy storage.
How big is Total today in the Jordanian market and what do you think the company should work to improve?
I think that Total brand awareness is greatly increasing over time. However, we are perceived as a gas stations network brand. We are working on service diversification and our lubricants offering.
Safety is a value that we are constantly working to improve for us and for our partners and contractors. We also aim to lead the market in terms of customer service and satisfaction. This is not merely wishful thinking, but a quality process that we call “Top Service” which consists of customer service evaluation by an independent entity.
Also as part of Total’s support to the local community, the company launched the Young Graduate Program in Jordan about three years ago to give young graduates from the Jordan University of Science and Technology an opportunity to discover working life through a genuine hands-on experience and gain an insight into how an international company operates. The company has also partnered with the Hashemite University whereby we give educational content and share experiences through workshops and seminars.
This is part six of a nine-piece story. Other pieces include: