Promise in the private sectorJuly 20, 2020
Abdulhussain Al Sultan, chairman of Oula, talks to The Energy Year about how the company has felt the impact of the Covid-19 crisis and the outlook for changes in the nature of the fuel retail business in Kuwait. Oula was established in 2004 as a result of government efforts to privatise filling stations in Kuwait. The company owns and operates 43 stations.
Tell us how the lockdown has affected your business, your sales and your operations in general.
It has caused us a lot of problems, starting from March, and the problems are increasing. Some of these problems are related to our marketing of the fuel, and some of it is the major consumption decrease affecting our investment and business in non-fuel sales in the stations.
In February, our major sales of all types of fuel was on average 126 million litres daily. In March, when the curfew started, it declined to 96 million litres daily, a 30% decline. In April, we declined to 60 million litres per day, which was 50% of February’s sales. May was the worst. From May 10 we had a full curfew, so our sales declined to 22 million litres per day, which is about 15% of our February sales. The full curfew will end on May 30, so we will see more of a decline in this period.
For non-fuel we have some business and investment in the stations, like car washing. The government told us we should close all 15 of them in our stations and they were closed from March 15. We also had car services in the stations. They were stopped on May 10 with the full curfew. Due to the curfew our logistics service, which fills the stations and involves about 30 tankers, was cut in half starting from April and then from May 10 it was decreased to eight tankers.
What are the consequences for your business organisation now, and will there be long-term consequences for the structure of Oula?
We have discussed this in our meetings and contacted the government as well to tell them that if they order us to shut down the stations, they should subsidise our income. We have about 260 people working to manage our 43 stations. Most of them are at home and not working. About one-third are working, but we are paying salaries to everyone. We asked the government to cover this because it represents about USD 1 million monthly. The government has suggested that in the future they will discuss subsidising the drop in income not just with us, but with other companies as well.
Are you satisfied with the government response to the crisis?
No. We still don’t have any response. We have investments like shares, land and real estate and the income we gained from that in the last 10 years was invested in things other than fuel, and that may cover most of our expenses in these times. We are still going and we might be able to stand on our own legs for the next four or five months without a problem.
In Europe, as the lockdowns begin to ease, we are seeing a completely different organisation of the retail spaces. Are you getting ready for this in your retail stations network?
It’s hard to make these kinds of decisions in the short term. We are looking at the European, American and Canadian approaches to these problems to see if we can learn from them. The Kuwaiti government will end the full curfew at the end of May. We are not starting new projects and will see in June how the government will react to the coronavirus.
Do you expect a rebound in sales when the curfew ends as people catch up on leisure?
We are now at the peak of the curfew. From June 1 the curfew is from 6pm to 8am, but our stations do not close at curfew. We may minimise them from 43 to 15 stations, but we are opening all our stations in the morning. We hope that, because from June 1 we are expecting a decrease in curfew hours, we will gain more money or investment in this period. Perhaps in a month or two we will have all our stations open.
What will this change in your business and the business community in Kuwait in general? Will there be business failures or a movement of concentration?
I don’t think we have a lot of companies that will go out of business in Kuwait. In our field we are preparing a proposal for the government and Kuwaiti oil companies suggesting we expand our business alternatives beyond fuel. We should have other business that supports us in situations like this in the future. We could start many kinds of businesses.
We also need to expand the stations in Kuwait: We have about 130 stations and that’s not enough. We are asking all three of our companies to have 100 stations each. Then they will have enough income to cover these types of problems in the future.
We are also looking at developing a fast food offer in the stations. We have this now only on the highways but aren’t allowed in residential areas. Other activities are also not allowed. If the government allows us to expand to other services, that will help us to make gains and develop more customer loyalty.
What have you learned from this crisis?
We have learned that even if we work in the fuel area and concentrate on that, we should expand into other business. Activities like real estate can be developed so that if there are any problems with the fuel business, we have an alternative. Also, we should computerise all the stations so we can control them, minimise expenses and not lose so much money paying our labour force.
We asked the government and Kuwait Oil Company to give us more opportunities for investment in other oil businesses, like having small factories for oil lubrication or where we can produce small projects close to our stations. These don’t need to be big investments but they will help support us.
Some of these ideas are new and developed as a result of this crisis. This is the first time the world has seen a crisis like this; it was unexpected. We may learn more after the crisis as we consider it.
For the country, what changes do you think will come out of this crisis? How will Kuwait develop and move forward?
Most important for business is transferring the system and the economy from the public to the private. Unfortunately the government is not helping with that. If we can make that change gradually and support the private sector, that will help. The history of Kuwait is based on the private sector and the businessman, not the public sector. If we return to this policy and we use our assets and income to improve the private sector more than in the past, I think it will prevent any collapse, improve the economy and move us away from challenges and deficits.
Our experience at Oula is that the people are very anxious to see this. When the retail stations were public, they were so poor and had no services or improvements, but when they were transferred to the private sector, buildings, management and services improved a lot. If we can improve even more by moving from public to private, it will help the future of Kuwait to be more stable and not dependent only on oil.