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Shell Commits to Expanding Gas Stations as Some Rivals Retreat

Istvan Kapitany, head of Shell’s global retail business

By Kevin Orland: 9 February 2018

(Bloomberg) — While many oil producers are stepping back from their retail operations, Royal Dutch Shell Plc is doubling down.

Shell, which has about 44,000 filling stations around the world, opened its first one in Mexico last year, the start of $1 billion in investments over the next decade. Shell also is ramping up spending in China, India, Indonesia and Russia, Istvan Kapitany, head of Shell’s global retail business, said in an interview in Calgary.

Even Canada, where other companies have recently sold their retail operations, will see increasing investments. Shell added 50 gas stations in the country last year, bringing its total to about 1,300, and plans to build another 50 this year while also rolling out new features to capture more of drivers’ retail dollars and building up its business for commercial customers, he said.

“We have very, very ambitious growth plans, and Canada is part of that,” Kapitany said in an interview in Calgary.

Meanwhile, others have been leaving. Chevron Corp. last year sold its gas stations and a refinery in British Columbia for about $1.1 billion. Imperial Oil Ltd., majority owned by Exxon Mobil Corp., sold almost 500 company-owned stations to a group of five fuel distributors for $2.1 billion in 2016.

U.S. Market

In the U.S., Sunoco LP sold its gas stations last year, following in the footsteps of ConocoPhillips, Hess Corp. and Valero Energy Corp. While people associate energy producers like Exxon and Chevron with the stations that bear their names, most of those are franchises in the U.S. and oil majors only own a small fraction of them.

Among other producers holding on to their retail businesses are Marathon Petroleum Corp., which rejected a push from billionaire Paul Singer’s Elliott Management Corp. to spin it off, and BP Plc, which like Shell is expanding its presence in retail.

A key to Shell’s strategy is tailoring the stations to regional preferences. For example, in Canada, the Hague-based company is planning to announce a program to increase its healthy food offerings in the coming weeks. In Mexico, Shell touts its guarantee that customers are actually getting all the fuel they paid for, an important promise in a market where fraud at the pump is a problem.

‘Local Culture’

“Local customer demands have to be satisfied by a strong local team that understands the local culture,” Kapitany said. “In this business, there are no global customers. The customer is always local.”

Having robust refining and retail operations, also known as downstream businesses in industry parlance, has been particularly beneficial in Canada recently. That’s because a lack of pipeline capacity has weighed on Canadian oil prices, hurting companies who produce crude but benefiting those that can benefit from the cheaper feedstock.

For Shell, the retail business also is an important means for helping the company adapt to a changing energy world. Shell is building networks of electric-car charging stations in multiple locations while also rolling out locations for fuel-cell and natural gas-powered vehicles. Electric mobility will expand over the coming decades, and Shell needs to play a part in that transition to keep serving its customers, Kapitany said.

“This is what we have been doing for 100 years, and this is most likely what we’re going to be doing for the next 100 years,” he said.

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