Prasert Bunsampun, president of PTT Oil, said the company this year plans to close its 300 petrol stations in unprofitable locations which will bring down the number of service stations to about 1,200 by the end of this year.

Shell earlier this year said it would close 60 unprofitable service stations in rural areas and would open around 10-15 new units. Shell is expected to have 800 service stations by the end of the year.

A source from Esso (Thailand) said the company will also reduce its petrol stations to around 500 from the current 800. Esso will change its service station strategy from dealer-owned to company-owned and operated. This policy will allow Esso to effectively implement a price cutting strategy and control the quality of the fuel it sells.

Caltex operates 581 petrol stations nationwide. About 50 are expected to be modernised this year, while about 60 will be closed down, he added.

The oil market situation this year will continue downwards with low marketing margins. The margin this year has plunged to around Bt0.70-0.80 per litre compared with Bt1.30-1.40 last year. The situation is expected to deteriorate further next year since the demand for fuel oil is projected to fall in 2000. The lower margins have forced many oil companies to shut down some of their service stations.

Based on information from the National Energy Policy Office, Shell had a market share of 15 percent last year, PTT 23 percent and Esso 15 percent. Shell, Esso and PTT all lost 1 to 2 percent of sales in 1998 while the shares of Bangchak and Caltex increased.
Caltex's market share improved from 12 percent in 1997 to 14 percent last year as a result of its retail-network modernisation programme.

Bangchak Petroleum also saw an improvement in its market share from 7 percent in 1997 to 8 percent last year.

Shell to cut prices to boost retail sales

SHELL Co of Thailand will focus on selective price-cutting and new products to boost retail sales by 5 to10 percent this year, said the company's general manager for retail sales, Tiraphot Vajabhaya.

After cutting costs through a region-wide restructuring, Shell is now prepared to lower prices in some Asean markets, he said. Although it will lower the profit margin, the price-cutting strategy would help the company boost sales.

In the middle of last year, Shell announced the restructuring of its Asean organisation. It consolidated its Asean and Hong Kong operations in Singapore.

Under the restructuring, Shell will reduce the number of its petrol stations in Thailand from the present 870 to 760, Tiraphot said. The company would close 20 to 40 gas stations in Thailand this year.

Despite fewer outlets, the company is confident that it will increase retail sales by 10 percent by the end of the year, he said. The company's target is to increase sales at double the market's growth rate, which is expected to be about 5 percent this year, he added.

Price competition is a normal practice in liberalised petrol markets even though it reduces profits, Tiraphot said. Moreover, profits from sales of petrol are higher in Thailand than in Europe, even though they are the lowest in the Asean region, he added.

At present, the profit margin for oil products in Thailand is about Bt0.70 to Bt0.80 a litre, but it sometimes falls lower, he said. For example, diesel and petrol were sold at a loss in the middle of last month.

The new selective price-cutting strategy would be implemented for Shell's operation throughout the Asean region.

Yesterday, Shell launched a new 91-octane gasoline, "Shell Sure". With the new product, Shell expects to boost sales of regular petrol in Thailand from 25 million to 30 million litres to 35 million litres in the next three to six months, Tiraphot said.

Sales of regular petrol are expected to surge from the present 25 to 30 percent of total petrol sales to 35 to 40 percent in the next six months, he said. At present, premium petrol (95 octane) accounts for 70 to 75 percent of total petrol sales, he added.

With "Shell Sure", the company aims to attract 20 to 30 percent of the motorists who now use premium petrol, Tiraphot said. The company would spend Bt25 million to market the product this year. Shell would also benefit from the National Energy Policy Office's Bt25 million campaign to encourage Thai consumers to switch from premium to regular petrol.

Shell has a16-18 percent share of the overall retail oil market, ranking second behind Esso. Last year, the company's retail business broke even.