Saudi Arabia primes retail oil pump
The recent announcement about negotiations for Saudi Aramco’s acquisition of one of the automotive fuel retailers in the Kingdom is heartening. How marvelous it would be to see Saudi employees working at Saudi Aramco gasoline stations. The oil giant would be able to transfer to the fuel retail sector the training, safety and professionalism for which it is well known.
The world’s gas stations account for about 13 percent of oil profits per barrel, while refineries capture less than 11 percent. In other nations it is not unusual for oil companies to have an interest in automotive fuel retailers.
Although there are respectable profits to be made, there will be challenges for Saudi Aramco in entering the fuel retail industry. Currently, all jobs in this sector are held by expatriates, who are paid low salaries and work long hours. If Saudi Aramco owned gasoline stations, Saudis in cities and villages would be willing to take employment in such operations, confident that they would receive a decent wage and dignity in their workplace. For that to happen, adjustments will have to be made in the employment environment of these gasoline stations, to better match the jobs to Saudi cultural norms. These upgrades will no doubt take immense effort, but many benefits are to be expected.
Saudi Aramco’s management and operations of gasoline stations would ensure optimal performance, attractive working conditions for Saudis, training for them to create the right workplace atmosphere and minimal reliance on foreign staff. It would also help to reduce the potential for commercial fraud in the mixing of fuel types and octanes, curtail the manipulation of the calibration mechanism for fuel pumps, and improve overall, design, efficiency and safety.
If Saudi Aramco owned gasoline stations, Saudis in cities and villages would be willing to take employment in such operations, confident that they would receive a decent wage and dignity in their workplace.
Saudi Aramco is well able to take on such a challenge. It succeeded first in the petroleum sector. The massive infrastructure projects it has tackled are legendary. The company has had other notable successes in the shipping industry, refining and now trading. An interest in the fuel retail sector would complement Saudi Aramco’s oil industry achievements. It can look to its experience with South Korea’s S-Oil and Motiva in the US for effective business models to use as inspiration.
Individuals continuing to own gas stations won’t be an obstacle. They can become branded independent fuel retailers and sign contracts in which they are allowed to have access to the brand name based on adhering to certain specifications by Saudi Aramco. They would get priority in gasoline deliveries and benefit from marketing activities.
While there has been much emphasis on moving to self-service gasoline stations, in Saudi Arabia such operations will take time to build and find acceptance. They will face obstacles due to cultural objections and should not be a priority.
If Saudi Aramco were setting the standards for gasoline stations, it would gradually bring in technologies from CCTV systems to automated payment mechanisms. The implementation of such modern infrastructure would create jobs as technicians would be needed to install and maintain such systems.
There is no convincing argument for any objection that Saudi Aramco would attempt to displace competitors and create a monopoly in the domestic fuel retail market. For decades, the Kingdom’s driving public has waited for a company to introduce gasoline stations with decent amenities and consistent quality standards. Perhaps if one company makes an effort to introduce modern fuel service stations, other companies will follow.
In Saudi Arabia, gasoline stations are not thought of as attractive businesses that add value to consumers. In other nations, this is not the case. Japanese gasoline stations have a reputation for excellent service, which includes cleaning the vehicle’s windscreen and side mirrors. The services and products offered by gasoline stations in many countries are myriad, ranging from branded restaurants and groceries to express parcel pickups.
There are many examples of the high-quality businesses that gasoline stations can be. It’s long overdue that an optimal service station model is developed to suit the Saudi culture and consumers’ satisfaction. Saudi Vision 2030 looks to capitalize on economic reforms across the business community. Saudi Aramco is more than welcome to show us what it can offer by putting its operational excellence into the fuel retail sector. And with our sisters now driving in the Kingdom, it’s long past time that safe, modern facilities are available to serve and assist everyone who gets behind the wheel.
- Faisal Mrza is an energy and oil marketing consultant. He was formerly with OPEC and Saudi Aramco. He is the president of #Faisal_Mrza Consulting. Twitter: @faisalmrza