BP pumps $450m into expanding service stations

Damon Kitney
THE AUSTRALIAN

BP in Australia. Source: TheAustralian
The local arm of global oil giant BP plans to spend more than $450 million over the next three years to open up to 60 new service stations across the country as it diverts funds that were previously spent on its ailing Bulwer refinery into its increasingly profitable retail network.
As oil refining at the Bulwer site in Brisbane will be officially shut down from today, BP Australasian president Andy Holmes said the company was also planning a raft of refurbishments across its ­nationwide network of more than 1400 BP branded sites, 350 of which it directly operates.
“Last year we stepped up the spend to $150m. And our plans are to continue doing that for several years to come with the aim of improving the quality of the retail sites that we have, but mainly extending the network and opening new ones,’’ Mr Holmes said in an interview with The Australian.
“It is very much the big urban centres in the east and around Perth. We focus on the major roads and the motorways and truck stops. That is where our investment in new sites is going: the Melbourne, Brisbane, Sydney and Perth areas and on the major highways.’’
He said the oil giant planned to open eight new sites this year but that the number could rise to up to 20 new sites a year in coming years.
Two major stations were opened last month in Sydney and outside Melbourne, while 75 site refreshments are planned in 2015.
Mr Holmes said last year that BP planned $2.3bn worth of investment in its refining, fuel marketing and petrol retailing business over the next five years following the closure of Bulwer, as it was unable to compete with larger, cheaper Asian refineries.
But this is the first time he had revealed the group’s detailed plans for its retail network.
BP employs 380 staff at Bulwer and this is expected to fall to about 25 by the middle of the year.
It continues to operate the much larger Kwinana refinery in Western Australia, around which it is conducting major infrastructure work worth tens of millions of dollars to smooth fuel supplies to the local retail market and Perth airport.
The news comes as Melbourne-based Viva Energy, the Vitol subsidiary that now owns Shell’s Geelong refinery, its petrol stations and its wholesaling business, reveals plans to spend $300m to increase its retail market share.
Viva also partners with the Wesfarmers-owned Coles in the Coles Express joint venture.
In its annual report on the Australian petroleum industry released late last year, the Australian Competition & Consumer Commission said the petrol retail sector recorded net profits of $495m in 2013-14 on 18 billion litres of fuel sold.
While non-fuel sales made up less than 20 per cent of total revenue in 2013-14, they contributed more than 40 per cent to retail sector net profits.
“It is a period of significant change in the downstream business but the market continues to grow. When you look at the GDP outlook for Australia and how that flows into fuels demand, the outlook is very strong. Knowing what we can offer to the motorist and knowing that is improving — that is giving us the confidence to step up our investments at the retail end,’’ Mr Holmes said.
Earlier this year BP launched a partnership with Virgin Australia’s loyalty program Velocity Frequent Flyer, the first time an Australian fuel provider has brokered a direct partnership with an airline loyalty program.
While he declined to comment on the profitability of BP’s Australian operation, he said the group was satisfied with its financial performance after significantly re­focusing its head office to get the group’s cost structure under control and expanding its retail ­investment.
“If you combine all those things, we have set a new direction and level of performance and are happy with the way the business is performing financially and strategically,’’ Mr Holmes said.
But he said the quality of the retail offering in Australia remained behind other parts of the world, especially in its coffee and food offerings.
“Talking not just for BP but I think for the whole industry, the value the customers place on fuel retail stations is very different overseas to here. In New Zealand, we win coffee awards. We know that when you put a Wild Bean cafe offer on a site, people love having that in their communities,’’ he said.
“In Germany, the quality of fuel is big there. And then having a deal with supermarkets is very important. In the UK having a Wild Bean cafe with a Marks & Spencer foods and a good fuel offering works well. Those are the kind of aspirations we are after.”
Next year BP also plans to launch its next generation of fuels across its retail network, including its BP Ultimate brand.
Mr Holmes, a chemical engineer born in Britain who has been with the company for 28 years, took up his role in Australia in June 2013.
He was previously head of BP’s global LPG and air fuel business and has retained that role despite relocating to Melbourne.