Strategy for Entering the World Market
The presence of KMG in KMGI is of strategic interest, because it provides a guaranteed sale of oil in the Black Sea and provide access to the end-user market with a population of more than 300 million people. In Romania, KMGI owns one of the largest and most modern refineries in the Black Sea region – Petromidia Navodari, as well as the Vega Ploiesti refinery. The network of gas stations of the group includes more than 1 000 points of sales in Romania, Moldova, Georgia, Bulgaria, France and Spain by owning jointly with CEFC 51/49 percent of shares in independent oil and gas company DyneffSAS. The subsidiary company KMG Trading is a single operator that exports crude oil from the company’s parent company KMG, as well as trading operations in international markets.
In 2007–2009 JSC NC “KazMunayGas” bought out 100 % of the shares of the Romanian oil company Rompetrol. This was in line with the strategic plans of the Kazakhstan company not only to export its oil to Europe, but also to process it and sell it in the form of final products.
KMGI Growth Potential
According to the results of 2017, the total volume of KMGI processing amounted to 5.66 MMt, including 4.7 MMt of oil. The rest is in alternative raw materials, including a renewable energy source – bioethanol. For comparison, in 2010, the total volume of processing was 3.5 MMt, of which 3.37 MMt were oil.
The average daily processing of oil in 2017 was 16.76 Kt with a record figure of 19 Kt per day, which is the highest level achieved in the entire 41-year history of the plant. For comparison, in 2010, the average daily processing was 10.87 Kt. At the same time, the energy intensity index dropped to 99.97 against 120 in 2010. The Vega, which also reached its historic record of 373,000 tons of raw materials, is also on track.
The aim of KMGI is to provide the maximum economic added value for JSC NC “KazMunayGas” from oil refining, petrochemistry, sales of oil and oil products on foreign markets:
- Ensuring access of JSC NC “KazMunayGas” to international markets by developing units in Europe and promoting the Kazakhstan national oil brand;
- Increase of operational efficiency and technological equipment to ensure maximum use of internal resources of JSC NC “KazMunayGas” in the field of oil refining and petrochemistry;
- Formation of KMG as an integrated and diversified oil company in international markets, competitive in the sales segment of oil and petroleum products;
- Providing consumers with high-quality petroleum products and services by building an effective supply chain and developing controlled sales channels.
KMGI Development Strategy
In addition, the company plans to build up to 200 FFSs, develop industrial services in upstream and downstream, build a CHP in cogeneration mode at the site of the Petromidia plant.
The company is working to increase the share of gasoline and aviation kerosene in the total output of fuel. KMGI plans to start by providing aviation kerosene supplies to several Romanian regional airports. At the same time, the main goal is the largest airport in the country, Henri Coande International Airport, located near Bucharest, the capital of Romania. The production growth will allow not only to follow the market trends of consumption of different types of fuel, but also to increase the margin of oil refining, taking into account the fact that aviation kerosene costs more than diesel fuel. In 2017, about 251 thousand tons of kerosene were produced.
The market share of Rompetrol in Romania for the sale of petroleum products is 25 %, of which a separate retail share of
15 %. The company is increasing market share in both Romania and the surrounding countries: Bulgaria, Moldova and Georgia. As for the plans in Spain and France, where the company also has its own assets, the task is to increase the share of the presence almost twofold – from 2.5 % to 5 %.
KMGI can sell the produced fuel for the most part in its own network of gas stations, consisting of 379 operating gas stations in Romania under the brand Rompetrol. In other countries of Western Europe the company works with serious competition. In general, in Georgia, Moldova and Bulgaria KMGI owns about 221 petrol stations. In 2017, Romania, Georgia, Bulgaria and Moldova sold 2.8 MMt of gasoline and diesel fuel. Regarding the growth rates, sales of KMGI in Romanian retail in recent years have grown by 10 % annually, while the Romanian market as a whole is growing by 2–5 %.
Since 2013, the subsidiary company KMG Trading AG is a single operator that exports crude oil from the resources of the parent company KazMunayGas, as well as trading in international markets with third parties. KMGT manages petroleum products in the processing and retail sector, including sales to subsidiaries of the Group (Bulgaria, Moldova, Georgia, Ukraine, France and Spain) and third parties in the Black Sea region. KMGT was able to consolidate its position as the main trader of NC KMG, having a sufficient scale to start business development with third parties.
The main criteria for the export strategy of KMGI to other markets:
- Maximize the margin, which implies the wholesale sale of petroleum products at the maximum price in accordance with market conditions;
- Optimize the supply chain around the refinery, which consists of minimizing logistics costs when exporting to other markets;
- The opening of new profitable markets oriented for the medium-term perspective to the beginning of direct investments related to retail trade. Trade in oil products with bordering countries such as Serbia, Turkey and others;
- Development of trading business with third parties and structuring of new export deals.
Development of petrochemistry in Romania
One of the potential growth points for KMGI in Romania is petrochemicals, whose products have a growing demand all over the world. Currently, the company can produce annually 26 Kt of propane, 62 Kt of low-density polyethylene, 85 Kt of polypropylene. At the Vega refinery, the company produces special products: hexane, environmental solvents, white spirit for the paint and varnish industry and bitumen. KMGI is the only bitumen producer in Romania, covering about 25 % of the country’s total bitumen demand. Petromidia refinery produces Euro-5 fuel, while processing various types of oil.
Marine terminal on the Black Sea
The presence of KMG in the geographic area connecting the Caspian and Black Seas is provided by the terminal “Midia Marine Terminal”, which is part of the KMGI group.
The company “Midia Marine Terminal”, which is part of the group, was founded in 2009, having received management of berths in the port of Midia from “Rompetrol Logistics”. Since 2009 the terminal has been modernized, which allowed it to become the most modern and multifunctional oil and gas terminal in the Black Sea for sea and river vessels. Annually, about 5 MMt of oil and 3.5 MMt of oil products pass through the terminal, which corresponds to the volume of transportation of 50 tankers and 60,000 railway tanks, respectively. Since the launch of the terminal, more than 385 tankers have been unloaded.
High growth rates of sales were achieved due to several factors. Over the past five years, Kazakhstani management has carried out a large-scale business transformation program, modernization of the Petromidia refinery, transformed and expanded the network of filling stations in several European countries. Firstly, this is a change in the operating model, secondly, it is rebranding the network of filling stations, and this is also an enhanced marketing policy. A well-considered and balanced investment program with the support of a shareholder of JSC NC “KazMunayGas” brings tangible results. Over the past five years, the company has been improving its operating indicators annually (raw materials processing, sales of petroleum products, reduction / optimization of costs for processing and marketing, financial indicators).
KMGI, through the Rompetrol brand, is an influential trademark of the national network of filling stations and fuel distribution points of other types known for the high quality of the range of its fuel products, related services, the HEI restaurant network and the convenient filling system using Fill & Go cards. The fuel produced by Petromidia refinery brand Efix (Euro-5) is the most well-known and well-proven brand of fuel in the Black Sea region. Romania is a key market for KMGI, with a good profitability of sales channels. The retail market in Romania is characterized not only by a large level of fuel sales, but also by a significant margin, compared to other markets in the Black Sea region. Economic growth and rapidly changing infrastructure offer opportunities for rapid and profitable expansion. KMGI’s strategy is to strengthen the company’s position as a major player in the top three in the Black Sea region, through the organic development of all sales channels, including further development of its own network of gas stations and re-branding of existing stations. Strengthening positions in the vicinity of the city of Bucharest is at the heart of this strategy. In addition, the trading activities of KMGI on the distribution of liquefied petroleum gas will be expanded.