Shell to buy Gulf U.K. retail operations

Shell U.K. Ltd. is negotiating with Chevron Corp. to buy the U.K. retail operation, commercial fuels business, and lubricants blending interests operated by Chevron subsidiary Gulf Oil (Great Britain) Ltd.

A Shell official told OGJ that Gulf's 450 gasoline stations will complement the 1,600 U.K. sites Shell currently operats: "In a similar move, we bought Gulf's London area sites in 1994, and these proved a real success."

Shell hopes to conclude the deal in the fourth quarter. Wood Mackenzie Consultants Ltd., Edinburgh, said the acquisition would enable Shell to move ahead of Esso Petroleum Co. Ltd. to become the U.K.'s largest marketer of oil products.

Chevron decided to sell its Gulf refining and marketing operation after a planned merger between the Gulf unit and Elf Oil U.K. Ltd. fell apart in May (OGJ, June 9, 1997, p. 27).

Chevron has decided to close Gulf's 115,000 b/d throughput capacity refinery at Milford Haven, South Haven, South Wales. It has sold its 50% share in Pembroke Cracking Co. to joint venture partner Texaco Ltd. Chevron is seeking a buyer for the Gulf headquarters in a separate deal.

What it means

Wood Mackenzie said the acquisition represents the first major move by Shell in the U.K. retail market for some time, and it must be seen in context with Esso's "Price Watch" campaign to match the pump costs of supermarkets and with the European downstream merger of BP Oil Ltd. and Mobil Corp. (OGJ, Mar. 25, 1996, p. 21).

"Esso's Price Watch campaign has roughly halved retail margins," said Wood Mackenzie, "but Shell has actually increased its retail market share following the closure of many independent dealer sites during 1996-97.

"The BP/Mobil merger, however, has had the effect of demoting Shell to third position in the retail market, a fact that the company is clearly not content with."

The analyst reckons acquisition of Gulf's retail network will raise Shell's share of the U.K. retail market to 19.4% from 16%. This compares with 17% for Esso and 16% for the BP/Mobil joint venture.

"The Gulf network is strongest in the central belt of Scotland, Northwest England, the West Midlands, and South Wales," said Wood Mackenzie, "although it also has sites throughout the south of England.

"Analysis of Shell's network shows that the company's regional presence will be particularly strengthened in Scotland and South Wales, although Shell already has a strong position in the northwest and Midlands."