Saturday, October 20, 2007

Shell Oil in Thailand is 115 years old

Lubricating the market

Shell's Chongnonsi LOBP is a production hub for the Southeast Asia-North cluster made up of Thailand, Taiwan, the Philippines and Vietnam


The red and yellow Shell logo could be as good or a close second to say Michelin's Bibendum man or Merc's star in terms of bragging rights to being the world's most recognisable brand logo.

I don't know... what about McDonald's golden arcs? Do tell.

Brand identity issues aside, what impressed me about Shell is the company's policy of turning off mobile phones while driving _ something all motorists should do _ as the writer found out while trying to call Shell Lubricant general manager for Southeast Asia-North, Pissawan Achanapornkul, to tell her about the bad traffic on Sukhumvit.

The truth? Yours truly was running late for this exclusive and using the mobile while driving.

Shifting gears back to Shell, in a nutshell, is a worldwide group of oil, gas and petrochemical companies with interests in biofuels, wind and solar power and hydrogen.

Shell has been in Thailand for 115 years since the reign of King Rama V and was marketed under the Crown brand locally known as Tra Mongkut in the guise of kerosene for traditional lamps before it branched out to diesel, petrol, bitumen, aviation fuels and lubricants.

Pissawan explains that the "tank farm" I am accustomed to seeing on a daily basis (Bangkok Post and Shell are neighbours on Na Ranong Road in the Klong Toei area) is actually home to Shell's Lubricant Oil Blending Plant (LOBP).

"Shell has been involved in the lubricants business for the past 37 years and the LOBP has increased its production capacity from 100 tonnes when it started to 200 tonnes per year today," said Pissawan, whose area of responsibility includes Thailand, Taiwan, the Philippines and Vietnam.

Although Thailand is regarded as Shell's regional hub for lubricants, the contribution to its overall business operation in terms of volume is small because of the disparity between the total lubricant market of 450 million litres versus the five billion litres of fuel sold each year.

"We look at revenue, volume and margin contribution. Unfortunately lubricant volume is not as much as its fuel counterpart. But looking at the total lubricant market of about 450 million litres, Shell accounts for about 100 million litres or 20% market share."

According to Pissawan, Shell is the market leader in the lubricant segment, while its nearest competitior holds 18%.

Three reasons explain why Shell is number one in lubricants: quality and credible lubricant products, continued development of technology and performance testing, and a genuine interest in customer requirements.

Pissawan said: "The three major lubricant groups are consumer, transport and industrial users. We have sales and marketing teams for our Southeast Asia-North cluster where Thailand serves as a model for distribution."

Consumer lubricants are Shell Helix and Advance for automobiles and motorcycles respectively. Transport lubricant is Rimula for heavy-duty trucks, while industrial lubricants for factories are Tellus, Omala and grease.

Shell moves its lubricant products via four channels: petrol stations and Proserv lube bays, re-branded lubricants for automobile OEMs through Genuine Parts Oil (GPO) and Shell-branded products for fast-fit aftersale service centres, local distributors (commonly known as yi-pua and sa-pua numbering about 20,000) and the fourth being factories with heavy machinery done by direct sales and five major distributors.

Zeroing in on its recent Shell Helix launch, Pissawan, clarified that the Shell Helix product line-up of the Ultra, Plus and Helix Super covers both petrol and diesel vehicles with Gasoline Engine Oil (GEO) and Diesel Engine Oil (DEO) products.

"We always knew the importance of the diesel pick-up market which is why we launched DEO products two years ago."

Esso recently launched a DEO product for pick-ups targeting a similar range of customers.

Shifting gears to how big is Shell in Thailand, the comparable standard used will be what she termed as "proper petrol stations" and not your rural mom-and-pop operation with a 200-litre barrel dispenser or pumper.

Shell has 570 petrol stations which ranks it third behind the market leader the Petroleum Authority of Thailand Plc (PTT) and Esso.

"Last year we reported roughly B100 billion in revenues from our retail business units (petrol stations), commercial field (industrial use), roads (bitumen), aviation fuel and lubricant business operations."

As to why there are just one or several Shell petrol stations lined up in a single soi , it depends on what Pissawan described as "throughput per site".

She said: "The throughput per site or sales at each petrol station must be appropriate to customer behaviour. Is it convenient and reliable? Quality of product. It involves many factors and not just numbers."

"Is the area residential or customers are just passing by our stations? Then we can look at the density of petrol stations, followed by availability of plots which will help calculate how many nozzles because the sizing of plots determines how many nozzles we can make available."

Pissawan made it clear that the lubricant industry is directly to related to the current problems of the vehicle market which is down 10.8% over last year during the same period.

"There are two parts. The first is the macro-economic picture which equates new car sales as an index for consumer confidence. It's a psychological effect which influences GDP and national economic growth.

"First-half car sales dropped sharply with double-digit losses, so the psychological effect comes into play, people worry about spending, consumer spending is down, driving is reduced which reduces the amount of lubricant being used. That's the micro-economic effect."

Shell claims that the overall lubricant market during the first half of 2007 was down by about 2-3%, but that will be countered by a more positive second-half thanks to optimism in the guise of an improved political situation, increased spending, higher consumer confidence and a more stable lubricant market with growth of 1-2%.

On an ending note, she acknowledged that competition in the automobile industry is high since Thailand has positioned itself as the Detroit of Asia with many automakers using it as an export base.

"I believe Thailand's auto industry will grow continuously. I must say that 2007 has been a rather abnormal year judging from the political situation, the baht crisis and the economy as a whole, which doesn't mean it is going to stay that way for ever.

"I am confident that Thailand will progress and in due course be able compete effectively in global markets."

10 questions for PISSAWAN

- Favourite historical figure?

Rama V.

- Favourite human being?

His Majesty the King.

- Favourite car?

I loved my father's old BMW 320i.

- Favourite industrialist?

Former Prime Minister Anand Panyarachun. His integrity and governance serve as a role model.

- Favourite restaurant in Bangkok?


- Favourite petrol station?

Tatvasu Shell station located off the Ekamai-Ramindhra highway. It won the Shell Golden Station Award and its owner has a high entrepreneurial spirit and very customer service-oriented.

- Favourite athlete?

Tiger Woods.

- Greatest extravagance?

I guess it's the passion I share with my mother in being a rare bank note collector.

- Greatest achievement (s)?

The fact that my parents are proud of their daughter, my husband is very proud of his wife and my children are extremely proud of their mother... are what I like to believe as the greatest achievements in my life.

- You are in charge of Thailand's automotive policy for one day. What do you do?

Give confidence by making sure policy is stable and clear.

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