Harvest Energy – change, challenge and opportunity

Harvest Energy, which has been operating in the UK as a supplier, blender and marketer of road fuels since 1995, has an annual turnover in excess of £3.5 billion

Formerly known as Futura Petroleum, the company was acquired in December 2007 by a group of investors including Island Capital and ION Equity which also owns Topaz Energy.

Making the most of opportunity

Fuel Oil News recently met with Simon Davis, head of sales and logistics at Harvest Energy.  Simon, who joined the company in 2005 with responsibility for the retail, commercial and logistics teams, said:  “Over the past 6 years, the whole economics of this industry and its market have changed. With change, comes opportunity and we’re actively looking at areas which enable us to plug gaps.”

The Harvest Energy operation employs over 70 people and consists of logistics, trading, shipping operations, sales, finance, IT, HR and risk.  The company manages its risk position and hedges on a daily basis.

“We’re a lean, customer-focused independent wholesaler which continues to grow and diversify. Working in a commodity market, a company must be fleet of foot to survive, responding to opportunities when we see them. For example, new legislation such as the Fuel Quality Directive and Renewable Energy Directive  – challenge the industry but also provide us with some exciting  opportunities.

“As majors continue to disappear from downstream and refiners change.  Working from a lower cost base, I believe these new refiners will be more competitive which has got to be good news for distributors.”

Fuel Oil News asked Simon if more newcomers could be expected to enter the wholesale arena.  “I’d be surprised if there is room for more independents nationwide but there may be an opportunity for some regional activity depending on how the new merchant refiners act.”

Stocks and supplies

“As an independent, our strength is that we can adapt much more quickly  to change.  We constantly review our business. For example, we revisit the possibility of supplying kerosene every year but ensuring a consistent supply poses a problem. Last year, poor weather and increased demand for heating oil gave distributors a double whammy – it really was the perfect storm.  In such a competitive market, a company must be very, very sure of what it’s doing; margins are very thin – get it wrong and money is easily lost.”

“Our contract customers want the right price and quality plus on time delivery.  With diesel supply representing 60% of our business, our service was hardly hampered by last winter’s weather conditions. We rarely have stocking out issues; I believe, we’re one of the better players at delivering exactly what and when we promise.”  Despite the market being heavily affected by recession, Harvest Energy’s sales volumes are up.

Extending storage options

Harvest Energy supplies fuel from north of Inverness at Tain down to Penzance.

“Storage is key as it enables you to control your own destiny,” said Simon.  Harvest has an annual storage capacity of 300 million litres with key sites across the country as well product exchange agreements with major oil companies.

A new terminal being built in the port of Amsterdam will soon enhance capacity.  In a venture with the North Sea Group BV – the Hydrocarbon Hotel – will come on stream in December.  Simon explained:  “This is a new to industry tank facility with a capacity of 140,000m3 which can accept product from large sea-going tankers. The project, which is on time and on budget, will give us the facility to sublet and to export blended product to the UK.”

Serving blue chip clients

Harvest supplies more than 10% of the UK’s motor fuel –-  and is a prime fuel supplier to the supermarkets; Morrisons and Asda being just two of its blue chip clients.  DHL, Wincanton and Turners are among logistics/haulage customers whilst First, Arriva and Stagecoach are some of its bus company customers.

Harvest Energy also supplies fuels to more than 60 councils. “Tendering is hard work but the work offers good regular volumes,” Simon said.

“Specification changes in gas oil have driven growth for us.  The whole gas oil market is very interesting.  It was never in anyone’s interest to add FAME but we’re addressing its challenges; we see potential with distributors in gas oil and intend to broaden our portfolio in this area.”

Expanding retail 

As majors pull back from retail, Harvest is rapidly extending its presence.  Over 50 sites now carry the Harvest brand with contracts in place for another 27 sites. “At the beginning of last year, we had just 9 branded sites, very soon we’ll have over 70,” Simon reported.

The company recently announced a 5-year supply/branding agreement with the 16 forecourt Cornwall Garage Group. Owner John Murray said:  “I like their people and I particularly like their enthusiasm. They’re going to do well and we’ll do well working with them.”

“We have a long term commitment and strategy for retail,” added Simon. “We want to grow our retail operation to cover as much of the UK as possible; for example the Cornwall Group agreement takes us further into the West Country.”

Running more tankers

The company’s logistics – three and half billion litres of fuel are delivered annually – are handled by the Suttons Group which operates 36 trucks on its behalf.  Harvest controls its vehicle scheduling and planning in-house. The fleet includes tankers specially designed by GRW Engineering, which are 8-foot shorter and slightly taller than the norm, allowing larger vehicles to access tighter locations.  (See page 5 FON July).  Rigid vehicles are used to service much of the council business.

Controlling biofuel quality 

Looking to the future, Harvest has invested in a 250,000 metric tonnes biofuels plant at Seal Sands on Teesside.  “The plant gives us a competitive advantage as we can control the quality of our supply – fundamental in biofuel production.”   The company is also involved in a project being taken forward by the University of Durham to develop biofuels feedstock from algae.

 

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