Vivo Energy, the retailer of Shell-branded products, has secured a retail agreement with Dutch-owned Lexo Energy that promises to strengthen its dominance of Kenya’s oil market.

Vivo is already rebranding 15 stations owned by Lexo Energy, saying that the two are just entering into a ‘retail supply agreement’, as the former downplayed talk of a possible acquisition.

The deal will cement Vivo Energy’s market dominance, which stood at 22.79 percent of the market at the end of last year.

Vivo Energy has 286 stations in Kenya while Lexo has 42 in the country and eight in Tanzania.

“Vivo Energy Kenya, the company that distributes and markets Shell products and services in the country, has entered into a retail supply agreement with Lexo Energy. Vivo Energy has not bought Lexo Energy, and neither is there a merger, acquisition, or joint venture,” Vivo Energy said.

But the Energy and Petroleum Regulatory Agency (Epra) says it is not aware of any deal between the two oil marketers.

“It (deal) has not come to us for regulatory approval yet. Regulatory approval is a condition precedent to the transaction going through,” Epra director-general Daniel Kiptoo told BusinessWeek.

The Competition Authority of Kenya (CAK) had also not responded to our queries on the deal by the time of going to press.

Lexo entered Kenya six years ago and its market share was 0.95 percent at the end of last year, according to industry data. Small oil firms have struggled to keep pace with the well-oiled Vivo Energy, TotalEnergies Marketing Kenya and Rubis.

Vivo Energy, TotalEnergies Marketing Kenya and Rubis control slightly above 50 percent of the local petroleum market, according to industry data.

The retail supply agreement comes at a time demand for fuel is likely to take a hit in the wake of record-high pump prices.

A litre of Super petrol is retailing at Sh211.64 in Nairobi while that of diesel is going for Sh200.99. Kerosene is retailing at Sh202.61 per litre in the capital city.

Consumption of Super petrol, diesel and kerosene between January and June dipped to the lowest levels in at least five years in the wake of the high prices since May.

Data from Epra shows that consumption of Super petrol dropped five percent to 1.01 billion litres in the six months to June from 1.074 billion litres in a similar period last year while that of diesel fell four percent to 1.31 billion litres compared to 1.36 billion in the same period.

Kerosene dipped to 43.59 million litres between January and June this year from 60.21 million litres in a similar period last year.