Analysis
BP – making a wholesale commitment
As majors continue to withdraw from the downstream market, Fuel Oil News was keen to quiz BP about its position within the UK’s wholesale market.
To this end, FON recently met with Simon James, who has held the position of wholesale negotiator at BP for just over a year. Simon’s role involves maintaining and building existing business as well as identifying and developing new business opportunities.
What is BP’s position in the UK’s wholesale market?
A recent strategy review has looked at BP’s wholesale business within the context of its larger UK organisation, and concluded it to be a good fit.
“Currently, BP is a relatively small player in the wholesale market,” Simon told FON. “However, following the review we believe we’ve identified what needs to be done to enable us to compete more effectively in this market. In the past, we probably expected to extract higher margins than were possible which impacted on volumes. We’re now looking at wholesale in a slightly different way; of course, making a profit is still important but, we see many other benefits to doing this business other than pure margin.
“As well as ensuring the operational efficiency of our infrastructure, having a wholesale arm enables us to improve cost build-ups and ensure assets are fully optimised. The business naturally complements our nationwide network of 1200 service stations and strategic supply locations at Hemel Hempstead, Northampton, Kingsbury, Hamble and Belfast. (With the exception of Hemel, all supply kerosene.)
As other majors withdraw from the UK’s downstream sector, how does BP see its role?
“We see ourselves as being in a great place to take advantage of others divestments in UK downstream. Our strong supply chain and import locations give us a competitive advantage.
Having sold its last UK refinery to Petrochina/INEOS where does BP now source product?
“As the first major to divest its UK refineries – Coryton and Grangemouth – it was a brave move and, it has taken awhile to adjust from an integrated refiner/marketer to become more of a pure play retailer and an importer/purchaser of product. Of course, BP does still operate one of Europe’s largest refineries – Rotterdam refines 400,000 barrels of crude per day.”
BP has also divested non-core terminals – Aberdeen and Inverness to GB Oils, Dalston to INEOS and the Isle of Wight to MRH.
Who are BP’s main customers?
“We deal with a variety of customers both spot and contracted. We’ve a good mix of business both new and long-term and we’re currently getting a number of enquiries from prospective customers looking for long-term security of supply.
Does BP see a long-term commitment to the downstream sector and, if so, why?
“Retail is a tough environment and we still see many of our competitors reviewing whether to stay or go. That said, we’re firmly committed to the UK downstream market – we’ve spent a number of years ensuring that our service stations are the right sites in the right locations. BP’s strong retail brand name is now backed up by our relationship with Marks & Spencer’s Simply Food and our own Wild Bean cafes. Add to this our Nectar points loyalty scheme and our Ultimate premium grade fuels and, we have one of the strongest offers in the marketplace.
“As a further demonstration of our continued commitment to the UK market, we’re making a significant investment in an exciting new storage project on the Thames at Canvey Island. This will enable our London-based supply and trading team to import product into the south east before using the UKOP pipeline to move this product inland at competitive rates. We see this as an excellent opportunity to better support our existing business and, a strong base from which to develop new business.
Repositioning and gaining new business
“Although it’s true to say that BP probably didn’t react as quickly to market changes as it could have, today, we’re excellently placed to take advantage of this changing market. With the option of both importing and purchasing from third parties, we’re in a great position to offer customers competitive prices for quality products from first class facilities with a reliable supply. Market changes have unsettled people who’ve previously had long-term relationships with their supplier and we’re already gaining new business as a result. BP is definitely in the wholesale market place and keen to do business.”