Puma Energy bets on expansion in Australia

Matt Chambers
SEPTEMBER 07, 2015
THE AUSTRALIAN

Puma Energy, the fuel-selling arm of Dutch trading giant Trafigura, is betting on an Australian recovery in the next couple of years as the commodities cycle turns and population growth drives fuel and bitumen demand.
Puma Australia managing director Ray Taylor says his company’s aggressive Australian expansion will continue, with another $500 million earmarked for spending on fuel import terminals, which will bring Puma’s investment here to more than $1.5 billion since 2013, when the nation’s shrinking refinery sector highlighted the potential import business here.
That total investment includes the purchase of BP’s Australian bitumen business last month for an undisclosed sum understood to be in the hundreds of millions of dollars.
“Refineries are continuing to close, new players are continuing to enter and our view is that will continue,” Mr Taylor told The Australian, citing BP’s 2014 decision to close its Bulwer Island refinery in Brisbane and a move by Mitsubishi to build a diesel import terminal at Port Bonython in South Australia.
“There is a requirement to build more infrastructure to cater for a market that will be more ­import-supplied, and that brings opportunities.”
Puma’s controlling shareholder, Dutch-owned trading giant Trafigura, has, like its compatriot and rival Vitol, made a big push into Australia as the nation’s oil refineries close under competitive pressure from large Asian refineries. The resulting need for increased shipments of petrol, diesel and other fuels has turned Australia into Asia’s biggest refined fuel import market, attracting aggressive trading companies whose specialty is moving finished product around the globe.
The Australian fuel market has been flat following the end of the commodities boom, but Mr Taylor said things were expected to pick up.
“Our view is it will subdued for the next 12 to 18 months and then we’re looking at an upturn, he said. “We’re viewing this as the bottom of the commodity cycle and we think we’ll see some recovery going forward.”
And if some of Australia’s four remaining refineries (one each in Sydney, Melbourne, Brisbane and Perth) close down, imports and the larger-scale shipping on which Puma is focused will bring more opportunities.
The BP bitumen purchase ­followed about $900m of acquisitions that gave it a fuel import and distribution business, including service stations, across Queensland, the Northern Territory and southern Western Australia.
It is now selling 2-2.2 billion litres of fuel a year for annual revenue of close to $2.5 billion.
Puma’s focus will now be on building import terminals and other fuel distribution infrastructure, rather than buying it.
“We’re probably looking more at organic growth now,” Mr Taylor said. “We now think we have a good core and business base to grow organically, so we’re expanding into NSW and Victoria and we’ll ­continue to grow in WA.”
Puma’s purchase of the BP bitumen business, which covers Queensland, Tasmania and Western Australia, follows the 2013 acquisition of Caltex’s bitumen business.
It gives Puma about 30 per cent of the Australian market, which is the biggest in the Asia-Pacific after China. This makes it about equal in size to the Australian bitumen business of the Vitol-controlled Viva Energy.
Trafigura controls the biggest bitumen fleet in the world, meaning it can get the oil refinery product from overseas to its local plants efficiently, where it is mixed with aggregates such as sand and stone.
“With the local refineries not making bitumen, the model is aligned to what we do on the fuel side, we source globally and own the infrastructure to get it to market in the most cost-competitive manner,” Mr Taylor said.
The company also plans to move more aggressively into retail fuel, opening more Puma-branded sites, and expanding into Victoria. “We’re getting a network up nationally for servicing the diesel transport market, so we’ll continue to look at where we need ­facilities to service that,” Mr Taylor said.
“With transport companies, a lot of them run regionally, if we’re not able to service them in Melbourne and Sydney, we’re at a competitive disadvantage.”
Puma is also spending money on research into what consumers are looking for.
“We’ve spent a lot of time getting the brand out there and upgrading the forecourt. But we haven’t spent a lot on the shop, so that’s where we’ll start to kick off some stuff next year,” Mr Taylor said.