Petro Retailing Business
Petro Retailing Business
Petro Retailing Business
UPSTREAM DOWNSTREAM
❑ Exploration ❑ Refining
❑ Production of ❑ Distribution
Crude Oil & Gas
❑ Marketing of
Petroleum Products
Oil Companies in India : Categories
Exploration Refining & Pure
Pure Refining
& Production Marketing Marketing
companies
✓Dismantling of APM.
✓ Are marketing companies free to price their product?
The Customer
Enablers in Petroleum Chain
✓Suppliers of Crude Oil
✓ OECD (Organization for Economic Co-operation and Development)
– Consuming Countries
✓ OPEC (Organization of Petroleum Exporting Countries) – a
significant part of the crude oil supply and reserves is concentrated
in the hands
✓Refiners
✓Consumers – 2W, 4W, Car , LCV etc. (Small Consumers) and
Petrochemical Plant, Power Station (Wholesale Consumers )
Petroleum downstream industry serves
fundamentally two types of customers
❑ New Competitors
❑ Site Rationalization
❑ Site Upgradation
❑ Non-Fuel based proposition
❑ Customer Loyalty Program
Customer Relationship
in
Petro Sector
Customer Relationship in Petro Sector
✓ Prepaid Petrocard
✓ Clubbing Petrol with LPG
✓ Customer service >> COCO, Large format RO
✓ Loyalty Programs run by Oil companies
✓ Automated Fuel Stations
✓ Vouchers and Reward Programs
✓ Convenience Store
✓ ATMs at RO’s
✓ Added Services – Car Wash, Lubricant top up, Internet kiosk etc.
Production & Strategy
in
Petro Industry
Petro Sector – highly regulated Industry
❑ Petroleum Production – Highly Regulated Industry
❑ Exploration and Production
✓ Exploratory Drilling
✓ Development Drilling
✓ Commercial Production
✓ Contracts and Licenses
Tools for Measuring Exploration Efficiency
and offshore
activities
❑ Cess, which was earlier levied on crude production, has been abolished
for the blocks offered under NELP
Mumbai
▪ Density Test
form
needed
Modes of Operation
Case Studies
✓ Consumers
✓ Manufacturing Downstream
✓ Distribution
ONGC,RPL, GAIL , OIL, MRPL, Essar, Cairns Energy, Petronet LNG and
Nagarjuna Group
❖ They bring conveniences that allow customer to carry out his/her banking
activities
Vision
❖ Highest performer in sales growth over industry
❖Sustained profitability all the way through increased sales, ARB earnings, cost
optimization, branded fuels and branded lubricants.
❖ Corporate level tie up has been made with Tata Motors , US Pizza
Customer Loyalty Programs by HPCL
Quality Assurance Initiatives
Branded Fuels
❖ “ Good Fuel Promise” - mobile labs for
❖ Power
Club HP outlets
❖ Turbojet
❖ Surveillance audit for “Club HP“ ROs
Fuel Promises
Non-Fuel Business
❖ Quality products
❖ C- stores
❖ Checks available at RO – Filter paper
❖ATM
test, Density check, Checking Lubricant
❖ food joints
❖ Period sample check
Petro Stations and Retail
Outlets
Petrol Station Security
❖ In USA, QuikTrip also uses consumer ❖ Award wining program for Ros at rural
experience to reinforce its price-based area
❖FMCG Tie up
Creating differentiation thru C-Store business
5C Analysis of Marketing
5C Analysis of Marketing
Do 5C Analysis for Retail BU for HPCL >> Will it be the same for Urban/ Rural
and Highway segments ?
How To Sell Value Instead Of Commodities
Step 1: Identify key levers to impact
the customer’s business
❖ In economic sense, price is what a buyer pays for the utility of the goods that
he buys
❖ In that sense, the price of crude oil is the market price in the physical market.
❖ Paper market is actually a derivative market, where physical crude is not
available
Refiners
(b) revenue for the producing country and margin for the refineries (the buyers),
(c) current production level and investment for future oil fields, and
(d) some other geo-strategic fronts as having political and military dimensions.
Players in Physical Market ………………………………(2)
Trading Companies
❖They invariably have some equity holdings in some crude oils somewhere in the
world
❖Alternatively, they have purchase contract from the original crude oil producers
Integrated MNCs
❖ They are very powerful operators in the crude oil market by virtue of their scale
at operation, volume of transaction and financial strength
(b) the swap the crude oil, inter grade or inter month; and
❖Paper markets are basically markets where right to crude oil is traded.
❖It is a mixture of crude oil market and financial market
❖This market has multiple uses, the principal among which is price risk
management
❖This market consists of institutions like Oil Exchanges, Financial Institutions and
Brokers, in which instruments like futures and swaps are bought and sold
Crude Oil Pricing
Pricing Concept
The pricing mechanism was based on the concept of retention price, by which
❖ refiners were allowed to retain out of their sale proceeds – cost of crude, refining
cost and a reasonable return on investment
❖ The same mechanism was extended to marketing and distribution companies,
which were compensated for operating costs along with an assured return
❖ The APM played a significant role in insulating oil producers, refiners and marking
companies from global oil price fluctuations and fulfilled the socioeconomic
objectives of the government considerably
❖but in the process failed to generate adequate incentives for investment in the
sector and thus failed miserably to create a vibrant and globally competitive oil
industry
Tradable and Non-Tradable Crude
The time frames for buying crude oil are two
❑Annual Term Contract
❑Spot Purchase
There are some types of crude oil in the Middle East, which can only be bought by
annual contract and these crude oils are destination specific. These are, therefore,
called Non-Tradable Crude. (Arab Heavy, Arab Light, Arab Medium, and Kuwaiti
Crudes)
The crude oil which changes the hands of multiple sellers, is available in the spot
market – Tradable Crude . The physical crude oil market is such that it is to be
booked at least two months prior to the month of loading the cargo.
Formula Price
When there is a booking for cargo (two months in advance) two things are
finalized – Quantity & Price
✓ This rate is applicable for all the cargoes loaded during a specified period and uniform for all the
buyers in the region, irrespective of the volume.
✓ Some companies like Saudi Aramco and KPC, announce a premium or discount to the average of
Benchmark crude (Oman and Dubai). They announce in the first week of the month for the next
month
✓ Company like ADNOC announces an absolute number in the first week of the month, applicable for
all the cargo loaded in the previous month.
✓ NOC of Yemen and Nigeria announces a premium or discount to Benchmark crude (Brent). The
applicable price is average of 5 or 6 days after the Bill of Loading days
Underlying principles in the OSP System
✓It is a declared price (or posted price) by the seller, and applicable to all
the buyers in the region. – NO negotiation
✓While setting the price, the sellers usually make the price level in line with
the spot price in the respective destination market.
Platts and Argus
✓Platts is a leading energy news service agency – set up in 1923
✓ In the crude oil market, Platts plays a crucial role in the daily assessment of
crude oil prices, including those of benchmark Crudes
✓ Platts, at the end of the day, assess and reports a high, mean, and low price, at
which a particular crude oil was traded in a particular market
✓ Petroleum Argus is another agency of the same kind.
✓ The methodology adopted by Argus for price assessment is different from that
used by Platts
✓ However, the price assessment by both for the same crude follows the somewhat
similar level
✓ In the crude oil market , Platts has more acceptability than Argus
Factors Affecting Petroleum Prices
✓No theory has thus far been able to use economic variables in
a model that can accurately predict future oil prices
▪ In the revenue earning game played by both the oil producing countries and oil
consuming countries, OPEC does not want to be a losing party
▪ Another compelling purpose for which OPEC countries barter their output and price
control is to earn measures of political stability and military security.
Effect of OPEC’s Policy
instruments viz.,
▪ The geographical proximity of Middle East is really an opportunity for India by way of
▪ Some of the Indian refineries are configured to process the types of crude produced in
Middle East.
➢The combination of rising oil consumption and relatively flat production has left India
increasingly dependent on imports to meet its petroleum demand
➢ In 2010, India was the world’s fifth largest net importer of oil, importing more than 2.2
million bbl/d, or about 70 percent of consumption
Objective of India’s OPEC Policy
➢ Crude types were limited, which formed a common basket for all PSU Refineries
➢ Sources of import were also limited, dominated by protocol and convention of
Indian Government with National Oil Companies of Middle East.
✓ Diversify the supply sources. New Crude sources are to be tapped. For
example, countries like Venezuela, Angola, Egypt, and Libya has not been
properly examined.
Old Era Marketing (Pre & Early Post New India Approach (1975
Independence) onwards)
Private firms
Nationalized company
Commodity
Commodity
Unorganized sales
Price regularized & administered by Govt
Care”
Why is it required?
Stagnant market >> overall demand is not growing >> One way to
increase margin is by getting more market share
Factor that has added to the low level of development work has been the mergers of a large number
of companies with investments in the North Sea:
▪Western Investment in Middle East
▪ US Independents Prefer to Explore Overseas
▪ China: is becoming more and more dependent on imported oil as it looks towards the next
decade
▪ Asia Pacific Region: Oil producers in the Pacific Rim are expected to increase production
significantly with the use of enhanced exploration and production technologies.
▪ Libya: has been heralded with the title of “The no. 1 Exploration Hotspot”
▪ Africa: Several West African producers (Angola, Cameroon, Chad, Congo, Gabon and Ivory Coast)
Top ten exploration hotspots in the world as per the
latest survey
o Libya o Iraq
o Iran o Indonesia
o UK o Angola
o Australia o Brazil
o Algeria o Egypt
Alternative Fuels
Alternative Fuelled Vehicle (AFV) is any vehicle capable of operating on an alternative fuel, such as
LPG, natural gas, alcohol or electricity.
There are two configurations:
1. Dedicated, one fuel
2. Non-dedicated
a) Hi-fuelled : can operate on either an alternative fuel or gasoline but not at the same time plus
they have the separate storage system
b) Flexible fuelled: Flexible fuelled can operate in either alternative or conventional fuel or a
combination – single storage and combustion system:
c) Duel fuelled : Duel fuelled can burn two fuels simultaneously, stored separately, and injected into
the combustion chamber simultaneously [conventional fuel + electric]
Alternate fuels : LNG/ LPG/ Ethanol /Methanol/ Hydrogen/ Bio-Diesel/ P-Series Fuel --vegetable oil,
animal plant waste sourced fuel, used as an alternative to gasoline.
Emerging Issues In
Indian Oil Industries
Issues & Opportunities in Indian Petro Retailing
❖Import Parity Price
❖Managing Unannounced Surplus
❖Technology
❖Security
❖Self – reliance
❖Petro retailing in general stores – FMCG stores and supermarkets
❖Food Service Outlets
❖Ancillary/ value-added services - Vehicle care/ ATM/ N2 / Bill Payments etc
Case Studies
❖British Petroleum