Purchasing an Existing Fuel Station

When you have a desire and passion to eagerly have a fuel station, there is the option to purchase an existing fuel station from any major oil company. GASPET can help any new client with the journey in the South African petroleum industry or a white site. Which is defined as not controlled by any oil major and land/property, and the property supply is not governed by an oil major. Offering insight information and provide advice to customers regarding the necessary details and varying expertise of buying an existing fuel station in South Africa.

Additionally, there’s a difference between purchasing an existing fuel station versus starting/building a fuel station from scratch, that is why there is a lot of value to existing fuel stations. Oil majors have more capital, more time and therefore start with new petrol stations quicker. If you are interested in starting a fuel station from scratch read the article here.

5 things to take note of before starting the process of purchasing an existing fuel station:

1) Who owns the rental agreement

2) Who owns the supply agreement

3) Who owns the branding agreement

   (all of these can be owned by the same person or by different people). 

4) Whose name the site license is in

5) Whose name the retail license is in

If anyone wants to purchase any of the fuel stations that are within the big oil majors, you first need to be approved by the oil major to be able to become the operator. Even if you own the business, you can’t just sell it to anybody, you need to find a willing buyer and then the oil major can approve in most cases. There is a strong BBBEE component to it as well. For instance, you can’t buy any of the oil majors sites if you don’t have a BBBEE component.

Finally, to determine certain costs to consider when thinking of purchasing an existing fuel station, you first need to examine the below.

  • Prices for an existing fuel station are determined by 2 components:
  • Amount of litres it is pumping
  • What the value add services on the site are (kiosk, tyre shop, etc).
  • Is it only the operator or does it include the land
  • For which period is the property bought

Based on these costs, you can calculate what the gross profit could be, normal expenses and then apply evaluation models to determine what is a realistic purchase price. Hidden costs include working capital, as you need to have product underground and have stock in your shop, and even though it is a cash business, your Wetstock working capital changes on a monthly basis based on the change in petrol/diesel price.

Lastly, Department of Energy, South Africa issues the retail and site license, and they have certain requirements regarding the details. 

As an example, the below explains the differences of provincial requirements. It is important to take note of the following restrictions applying to different provinces regarding owning a fuel station:

Limpopo:

Department of Environmental Affairs has changed legislation/regulation stating in Limpopo the maximum of combined storage capacity on site is 30 000 litres (30 cubes) before triggering ‘list of activity’, before completing a basic assessment report.

Other provinces:

Combined storage capacity on site is 80 000 litres

An ‘Environmental Exemption Letter’ stating you are permitted to put up the following storage capacity on site and it’s up to 80 000 litres  or 30 000 litres (in Limpopo only) without conducting or submitting reports.

If you want to go above 80 000 litres or 30 000 litres (in Limpopo only) a basic assessment report needs to be conducted and can be rather costly (about R160 000/R170 000) and a minimum of 1 year to conduct.

If you are comfortable with the above and would like the take a further step you can contact GASPET here to continue the conversation.