Pumangol’s forward-looking strategy in Angola’s downstream Ivanilson-MACHADO

When Angola liberalises the downstream sector, I think fuel storage will be a good business.


Pumangol’s forward-looking strategy in Angola’s downstream

July 5, 2022

Ivanilson Machado, CEO of Pumangol, talks to The Energy Year about how the company has contributed to increasing the nation’s inland fuel storage capacity and the main challenges and opportunities for downstream companies in the event of sector liberalisation. Sonangol-owned Pumangol is a downstream company active in petroleum product retail, storage and management.

What were the key drivers behind the 2021 agreement between Sonangol and Pumangol?
It is public knowledge that in 2021 Sonangol’s shareholding in the Puma Energy group was taken over by Puma Energy and Trafigura in exchange for the sale of Puma Energy’s Pumangol business in Angola to Sonangol.
The Pumangol business comprised a retail network of 79 service stations; a commercial business serving B2B customers, with fuels, lubricants and other services; and services at four airport terminals and three storage terminals, including the state-of-the-art Terminal de Combustíveis da Pumangol Luanda (TCPL) in Luanda Bay.
By owning Pumangol’s fuel retail outlets, Sonangol enhances their customer service level and experience. Everybody knows that Pumangol’s level of service is superior.
Another important point is that Sonangol saw a good opportunity to increase their fuel storage capacity by incorporating the inland fuel terminals owned by Pumangol.

How has Pumangol contributed to increasing the nation’s inland fuel storage capacity?
In recent years, Pumangol has enhanced Angola’s inland fuel storage capacity through the commissioning of the 278,000-cubic-metre capacity Luanda Pumangol Storage Terminal located on Luanda Bay. Now the company has three inland terminals in Luanda, Malanje and Lobito. We have reserved enough space in case we need to increase the storage capacity in the future, but that will only happen when the market is liberalised for private downstream operators.
In the past, Angola didn’t have the capacity to receive big fuel tankers. In those days, large tankers had to transfer the fuel offshore and the cargo would enter the port via smaller vessels, since they couldn’t offload all their cargo at once. One of the reasons why large fuel tanker vessels stayed with the product in the sea for up to one month was the lack of enough storage capacity and offloading resources, but this is no longer the case. This is a major change, since it positively impacts the cost of fuel management.

Would a downstream sector liberalisation process impact Pumangol’s business in Angola as it did in Mozambique?
As the downstream sector is open in Mozambique, everyone imports their products. But not everyone has invested in terminals, so most of the operators pay for storage. For instance, Puma’s storage business has BP and TotalEnergies as clients storing their fuel. Fuel storage is a very important business unit for us; it even includes the potential for renting outstanding storage capacity to competitors.
When Angola liberalises the downstream sector, I think fuel storage will be a good business because all the companies operating here will have to import fuel themselves, and will also have to store their product. This will create an added value and an opportunity for us, as we have the required storage capacity to cater for the market’s current and future needs.


What are the main challenges and opportunities for downstream companies in a sector liberalisation scenario?
Liberalisation would give us the conditions to grow, moving away from the Sonangol monopoly. If you have liberalisation, you can import, have your own terminals and your transport company. Companies will not be dependent on Sonangol’s stock to grow. Currently, we have to depend on Sonangol because we are not importing, and because we cannot modify the prices. Since 2015, we have been stuck with the same price, but costs keep increasing. Pumangol had to stop investing because it wasn’t profitable to invest.
Liberalisation will bring more competition. However, it can create issues with specific products: if [oil derivatives regulator] the IRDP starts giving licences for any given company to import lubricants, downstream companies will have issues with the many clients that decide to import on their own. In the past, the same thing happened with bitumen, when Chinese companies were importing bitutainers. We fought this, and the regulator stopped giving them licences to import bitumen, but now we have a similar issue with lubricants.

From which of your business segments do you expect the highest growth in the future?
Lubricants and aviation fuel experienced a major downgrade with the Covid pandemic, but now we can see these segments restarting. They are good businesses, not because you have big volumes, but because you have good margins. We are investing a lot in gaining new clients among transport and construction companies. We sell bitumen to Portuguese construction firms. We are trying to also supply them with lubricants.
We are finalising the process of restarting our bunkering business. In the past, we’ve carried out this business in partnership with Sonangol, so we understand it very well. There was previously a kind of monopoly on bunkering because services were only provided by Sonangol or subcontractors under its authorisation. But this is changing. At the end of 2021, we received the licence for bunkering, which allows us to operate and to import bunkering products.

How has the company’s business focus evolved throughout the years?
Before, we were mainly focused on retail, the B2B business and the construction of the TCPL terminal in Luanda Bay. Our focus was also Jet fuel supply for aviation clients as Angola was finalising the international airport. Presently, we’re trying to focus on our core business, which is fuel management.
We will be focusing on segments of business that give us better margins, such as lubricants, aviation and bitumen. Our aim is to diversify our business portfolio while maintaining the quality.
We are about to start the construction of two new gas stations, which we plan to open this year in around September-October. We are also trying to change our strategy for retail outlet convenience shops. We will try to optimise the spaces we have at retail stations where we have not used the whole capacity. We are looking at businesses such as drive-throughs, pharmacies and even banks. We have signed agreements with Spar and we are in discussion with KFC.

What role does the strategic location of your retail stations play in your company’s strategy?
As you know, our retail stations are mainly located either in the periphery of city centres or on key national roads. They were built with a forward-looking perspective on the country’s growth and development. The more the country opens, the more services will be required by our customers who travel throughout the country, and we need to be ready to provide as many essential services as those we are already bringing to our customers in Luanda.
Some of the services we intend to put in place are critical to any traveller and reinforce the status of the nearest shopping outlet to some remote locations such as Mussende and Lucira, just to mention a couple. We are therefore optimistic and happy to see that our vision of building our sites with that forward-looking outlook is already paying off and brings a competitive advantage.

How is Pumangol supporting Angolanisation?
We currently have no expats working within the company. In the last few years, in terms of suppliers and tendering, we’ve been trying to give support to Angolan companies. However, trying to support local companies is also a risk, as they don’t have the financial capacity to uphold their commitments, even with upfront payments. We also had many issues with staff recruitment, as people were not prepared to take on the work.
We have a training centre in Talatona where we can have up to 60 people a day being trained. It’s been recognised by the minister of employment, so we can train anyone, even the staff of the competition if they wish. We have a guest house in Viana, so we bring our people to be trained in Luanda. We might open a new training centre in Lobito, but for now we are just investing here in Luanda to improve the capacity and the conditions so that people from other provinces can come for training.
There is another side of Angolanisation, that is beyond business and related with corporate social responsibility. We have been supporting local communities with small projects, water distribution and social impact activities all over the country. In partnership with local health authorities, we carry out vaccination and diagnosis campaigns, and ongoing health awareness campaigns.
On the environmental side, we have a strong partnership with a national environmental NGO, Otchiva, in reforestation projects, from mangal planting to tree planting. Together with them we implemented a project to protect endangered fish species at the fishing port area near our Luanda Storage Terminal.
Before the transition, for quite a number of years we ran the DT Foundation-owned kindergarten, a world standard children’s day care centre right in the middle of Benguela’s busy informal market and warehousing area. This is another project that makes us proud of our footprint in Angola and it’s something that, certainly when the economic outlook improves, we would like to see replicated elsewhere in Angola.

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