Shell bets on petrol stations as electric revolution looms

By 2025, Shell plans to grow its global network of roadside stations by nearly a quarter to 55,000, targeting 40 million daily customers. (Reuters)
Updated 21 March 2018
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Shell bets on petrol stations as electric revolution looms

LONDON: Royal Dutch Shell is placing a big bet on petrol stations and convenience stores in China, India and Mexico as it looks to shore up profits during the electric car revolution.
By 2025, the oil and gas giant plans to grow its global network of roadside stations by nearly a quarter to 55,000, targeting 40 million daily customers, Shell said in a statement on Wednesday.
It will add another 5,000 convenience stores selling coffee and snacks, with growth focused on rapidly growing economies in emerging markets.
Shell, as well as rivals such as BP, sees retail as a way to secure demand for the fuels it refines, as consumption could peak as early as by the end of the next decade due to the growth in electric vehicles.
“We plan to be leading through the energy transition,” Shell head of downstream John Abbott said in an investor presentation on Wednesday.
Already one of the world’s biggest retailers with a well-known brand, Shell expects earnings from its marketing and commercial businesses to grow annually by 7 percent into 2025, when it will deliver $4 billion in earnings.
The company is also rolling out a number of experimental initiatives to introduce electric battery chargers and hydrogen chargers to its traditional petrol stations, hoping to capture some of the growth in the non-combustion engines.
The fuel marketing sector nevertheless faces a risk of overcrowding as many companies see growth potential there, warned Biraj Borkhataria, analyst at RBC Capital Markets.
“We are more skeptical on Shell’s plans in retail, as the market is fiercely competitive and the ongoing threat of EVs (electric vehicles) could put some of that earnings stream at risk.”
The Anglo-Dutch company said its downstream business, which includes refining, trading, marketing and chemicals, will generate $6-$7 billion organic free cash flow per year by 2020 based on a Brent crude oil price of $60 a barrel.
Free cash generation for the whole company is expected to reach $25-$30 billion over the same period. Shell delivered $15 billion in organic free cash flow in 2017.
By 2025, cashflow from downstream is expected to grow to $9-$12 billion.
Downstream proved its importance during the oil industry’s downturn since 2014, providing the bulk of Shell’s profits as the price of crude collapsed.
Shell has in recent years transformed its downstream business by selling some plants and upgrading others, helping the company ride out oil price fluctuations and shifts in demand.
The company is also bracing for a world of “lower for longer” oil prices due to rising oil supplies, particularly from the United States. Shell and others cut tens of thousands of jobs, lowered spending and brought in new technology to simplify field designs and operations
Shell also said it plans to invest $7 billion to $9 billion a year across the business and expects to deliver a return on average capital employed of more than 15 percent.


South Korea imports no Iran oil in November despite sanctions waiver

Updated 16 December 2018
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South Korea imports no Iran oil in November despite sanctions waiver

SEOUL: South Korea did not import any Iranian oil for the third straight month in November, customs data showed on Saturday, even though it has a waiver from sanctions targeting crude supplies from the Middle Eastern country.
South Korea and seven other countries were in early November granted temporary waivers from US sanctions that kicked in that month over Tehran’s disputed nuclear program.
But it kept imports at zero as buyers have been in talks with Iran over new contracts, with industry sources previously saying they expected arrivals to resume in late January or February.
With no Iranian cargoes arriving for three months, South Korea’s imports of oil from the nation were down 57.9 percent at 7.15 million tons in January-November, or 157,009 barrels per day (bpd), the customs data showed. That compares to nearly 17 million tons in the same period in 2017.
South Korea is usually one of Iran’s major Asian customers. Although the exact volumes it has been allowed to import under the waiver have not been disclosed, sources with knowledge of the matter say it can buy up to 200,000 bpd, mostly condensate.
Condensate is an ultra light oil used to make fuels such as naphtha and gasoline.
But as Iranian condensate supply has been limited due to the sanctions and rising domestic demand in Iran, South Korean buyers have been looking for alternatives from places such as Qatar.
In total, South Korea imported 12.71 million tons of crude oil in November, up 1.2 percent from 12.59 million tons a year earlier, according to the data.
South Korea’s crude oil imports from January to November inched up 0.6 percent from the year before to 131.23 million tons.
Final data on November crude oil imports is due later this month from state-run Korea National Oil Corp. (KNOC).