‘Leveraging the strength of Stanlow Refinery gives us advantage in UK retail market’

Debabrata Das New Delhi | Updated on January 20, 2018

NARESH NAYYAR, Executive Chairman, Essar Oil UK

After turning around the Stanlow Refinery, Essar Oil UK now plans to leverage the made in Britain proposition and establish a retail presence in the country. Having successfully opened seven dealer-owned dealer-operated outlets, Essar Oil UK wants to have at least 400 outlets in the next three-four years and ensure that the marketing business makes up for 25 per cent of Stanlow Refinery’s revenues. To attract customers, the company’s dealers have been able to offer a 1-2 pence discount on both ‘mogas’ (petrol) and diesel prices compared to Shell and BP Plc outlets in the vicinity. Essar Oil UK’s Executive Chairman Naresh Nayyar shares more about the company’s retail plans with BusinessLine. Excerpts.

Are there any advantages of operating in a mature market for transport fuels such as the UK?

It works both ways. The UK market is highly mature and competitive. If you are efficient enough you will survive. Entry barriers here are limited because dealers are available to change the branding every five years. What needs to be done is we have to be clear about the value proposition being offered to the dealers and the customers. I think once one is clear about it, it is not that difficult.

Secondly, the players in the UK market are changing. That gives us an opportunity. We feel that something definitely gives us an advantage is we can leverage the strength of our refinery.

Why are you going only for the dealer-owned dealer-operated model in the retail space here?

Company-owned company-operated retail outlets are quite expensive here. You can spend up to a £1-million here to have such outlets.

Secondly, we are also confident of the value proposition we are giving to the dealers. We are confident that we will be able to retain the dealers on a long-term basis.

Two contracts with Shell are coming to an end this year – the crude sourcing and product supply at fixed prices. As Stanlow moves past this legacy, what will be the benefits?

When we bought the refinery, it was a packaged deal from the Shell side that they hand over the refinery at a price. But also we had to supply the product at a fixed price which was below the market price and continue to buy the crude from them.

Most of the contracts are coming to an end by July.

This will now give us more opportunities to further optimise and get better realisation of our sales, improve the crude basket.

That is what we believe will create more value in the system which may be to the tune of tens of millions of dollars.

Our relationship with Shell has been very good in this five year period. They are our customer and they will be a major supplier of crude oil to us but not under the old contracts.

Do you see any synergies from the relationship between Essar Oil and Rosneft in terms of sourcing crude oil for the Stanlow refinery?

Sourcing of crude is an activity which we do independently and do not give preference to any particular supplier. It is all driven by the economics of the crude oil.

As of now, we haven’t found any Russian crude economically attractive in our system.

(The writer was recently in the UK on an invitation from Essar Oil)

Published on April 07, 2016

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