Oil v gas

With heating oil consumption already in decline in Northern Ireland, plans to extend the gas network are not a welcome development to distributors already under pressure reports Irish correspondent, Aine Faherty. Market share peaked in 2005 with 75% of households using heating oil; reduced to 68% in 2009.

Speaking at the company’s base 20 miles from the urban Belfast centre, Ken Hylands, managing director, Hylands Fuels, recalled the impact of a similar gas expansion in Belfast and surrounding areas.

“We just had to adapt in advance,” said Ken. “I would advise businesses in targeted areas (see box right) to do the same and be prepared. The secret is to continue providing a service at a competitive price and to ensure customers remain loyal to a product they still want. Nowadays customers just want to pay for what they can afford, so it’s important to have easy payment options with credit card, direct debit and standing order options.

In Ken’s experience, customers may not opt for gas, even when available, preferring to stick to what they know best. “Some may not have the option to switch; a majority of homes on an estate/road must opt for change before the high cost of running a pipeline into the area is warranted.”

Expansion is due to start in 2015, north and north west towns under consideration include Dungannon, Cookstown, Magherafelt, Coalisland, Omagh, Enniskillen/Derrylin and Strabane. Hillsborough, Ballynahinch, Downpatrick, Saintfield and Crossgar are being considered in County Down.

Not overly concerned is Malcolm Hill, business development manager with Solo Petroleum and AH Fuels which has most business in rural County Tyrone. Whilst Malcolm is confident that as a long established business, customers will remain happy with oil, he is concerned about the knock-on effect on ‘an oversubscribed fuel business.’

“Any increase in gas coverage will have a detrimental effect on the oil business, pushing its customer base away from the inner city/towns and into the more rural areas,” reported Michael Strain, general manager, Topaz Direct.

Gas is already in the main towns in which Kelly Fuels operates. “It will just be another competitor and we’ll have to deal with it,” said Derek McAuley. He likens the presence of gas to the new competition posed by the selling of home heating oil on forecourts.

The Northern Ireland Oil Federation (NIOF) has little doubt that the extension will go ahead as planned with oil customers targeted to switch. “This represents a real threat,” said David Blevings, NIOF executive director.

However, David did point out that the Northern Ireland Housing Executive (NIHE), which currently manages 90,000 social housing dwellings, may not hurry to changeover, despite gas being its preferred fuel. “With oil boilers only installed at many of these dwellings in recent years, these boilers are not at the end of their useful life so I anticipate gas conversion rates will take awhile. Whilst this is good news in the short term, we really do need to sit up and take notice of impending changes.

“We need to lobby direct store delivery (DSD) to support and introduce the Kingspan/Carillion Pay As You Go system to public sector housing and others that will allow oil to compete on a level playing field.

“If the oil sector is to retain a healthy market share it needs to think long term about the services it offers to the customer and become an energy provider offering energy services, not just oil.”

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