Published: Sep 13, 2007
MELBOURNE, Sept 13 Asia Pulse – Oil company Shell Australia admitted it left the retailing business because it wasn’t good at it, an inquiry into the price of unleaded petrol was told today.
In August 2003, Shell struck a deal with Coles to take over 600 petrol station sites to sell fuel as the supermarket giant looked to counter the operation competitor Woolworths had established with Caltex.
Shell chairman Russell Kaplan told the Australian Competition and Consumer Commission (ACCC) that maintaining franchises Australia-wide was expensive and saw an alliance with Coles as an opportunity to cut costs.
“We didn’t think that we were any good at (retailing) – it cost us a lot in overheads and profitability and that wasn’t very satisfactory to us,” Mr Kaplan said.
He said by leasing its sites to Coles, Shell now had a “better integrated outcome” than what it had enjoyed before the alliance.
Shell had beefed up its market share to about 27 per cent from 17 per cent after teaming up with Coles, which runs the popular shopper docket promotion where customers receive a four cents per litre fuel discount after spending $30 at its supermarkets, Mr Kaplan said.
He was asked if there was any prospect of a major independent fuel company establishing its own refinery in Australia instead of relying on Shell to provide it with fuel.
“It’s evident that it hasn’t happened, therefore it is evident that local refineries are competitive enough to satisfy all the buyers,” Mr Kaplan said.
He said a massive refinery being built in India, to be completed in 2008 or 2009, would have the capacity equal to the seven refineries that operated in Australia.
“The cost per litre out of that refinery will be far below what we can produce,” Mr Kaplan said.
“When that opens there will be a new reality in this region.”
Outside the hearing, RACV spokesman David Cumming said motorists should not hold their breath waiting for the price of petrol to fall when the Indian refinery came online.
He said with the Indian economy about to boom, most of the fuel would be consumed on the subcontinent and any spare capacity would be on-sold to China.
(AAP)
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