Shakeout seen as chance for competition

Neil Rae says Gull is picking up an independent site every three to four months. Photo / Bay of Plenty Times

The shakeout in the fuel industry represents a chance to bring increased competition to the market, says independent service station chain Gull.

With Shell on the brink of being sold to Infratil and the New Zealand Superannuation Fund, and Mobil also on the block, the club of oil majors is about to be broken up, says Gull chairman Neil Rae.

"There is an opportunity here with what's happening, not only with the shakeup of a couple of major oil companies but a shakeup of the club they belong to."

The arrangements between Shell, Mobil, BP and Caltex were an impediment to competition, he said.

While Gull is into its 11th year in New Zealand other entrants were put off by the majors' co-operation on use of terminals, refining and coastal shipping.

However one industry analyst said while there had been a failure - Fletchers' Challenge chain, the fact that Gull was still operating was proof that it was not impossible to break into the market.

Rae said there was an opportunity for the Commerce Commission with the support of the Government to look again at the arrangements between the big fuel companies. "There's never been a better time."

Announcement of a decision on the sale of Shell's assets - including 229 service stations and a 17.1 per cent stake in NZ Refining - is imminent. Mobil has consistently refused comment on its sale but as in other mature markets around the world it is expected to sell retail assets to concentrate on exploration activities.

Gull was claiming some credit for the shake-up since it introduced discounting..

"The competition has helped shape the profitability of the industry. That is the trigger in most places where oil companies have been there for a long time and had markets to themselves. Those markets are being opened up."

Industry analyst Richard Hale said the existing arrangements between big players were driven by the need for efficiency and he did not think these would necessarily change with new participants entering the market.

The Australian market is also undergoing transformation but this was snagged on Wednesday when the competition watchdog there blocked Caltex's proposal to buy 302 Mobil service stations.

The Australian Competition and Consumer Commission said the A$300 million ($383.6 million) deal would result in a "substantial lessening of competition" at specific sites, and have a flow-on impact in the wider retail fuel market.

Rae, from Gull's founding family, said it was possible the ACCC could look at ordering Caltex to make available some assets to competitors as has happened before in Australia.

It could be a tactic the Commerce Commission here could use, he said.

Rae said his company was picking up an independent site every three to four months and was regularly getting calls from operators and landlords disenchanted with agreements with the four majors.

The number of petrol stations in New Zealand has been falling for the past 20 years and Rae said there were few opportunities for new sites, due mainly to the cost of land and slim margins on fuel.

Gull has 36 branded sites between Masterton and Whangarei and two independents currently moving over to the chain. It also has three unstaffed service stations in Botany (Auckland), Hamilton and Taupo where it says motorists can knock 25 per cent off time by paying by cash card at the pump. Rae said the rollout of more sites, or combining them with traditional service stations, was being looked at.

The company was also upbeat about the future of biofuels, in spite of the Government dumping a mandatory requirement for biofuel to be added to petrol.

Almost half of the petrol Gull sells has 10 per cent ethanol blended into it and some new vehicles were capable of using up to 85 per cent ethanol. Although the mandatory requirement had gone, excise duty was not collected on the biofuel component, meaning it was cheaper than standard fuel.