A vertically challenged market

BP, Esso and Shell were supplying approximately 70% of the UK’s total requirements at the end of the 80s. Of the three only Esso now has a refinery presence in the UK – Fawley pictured here. Major reassessment of the market since 1980 has led to the three companies closing six of their UK refineries.

Since the late 80s, the UK oil market has seen a gradual shift away from domination by the oil majors and mini majors.

Their rationalisation and repositioning created a vacuum now filled by importers and wholesalers such as Greenergy, Harvest Energy, Mabanaft, Prax Petroleum and World Fuel Services. Collectively this group now supplies approximately a quarter of the UK’s inland oil products market and around 35% of its transport fuels requirements.

At the end of the 80s BP, Esso and Shell were supplying approximately 70% of the UK’s total requirements, with much of the balance sourced from mini majors such as Texaco, Mobil, Total, Conoco, Fina, Amoco, Elf and Gulf. Market presence was – and still is – underpinned by an extensive supply and distribution infrastructure, enabling product movements from refinery to market place.

Common to all these companies was vertical integration – particularly obvious in the UK’s refinery network and inland market presence with filling station networks comprising owned sites and branded independent dealers and authorised distributor networks. In the case of BP, Shell, Texaco and Total, equity distributors were also developed with these companies also supplying the lion’s share of aviation, industrial and commercial users and distributors.
A major reassessment
Sharply increased oil prices, the changing shape of the demand barrel and the slowdown of demand growth prompted the reassessment of both refining and market presence.

BP and Shell no longer have a refining presence in the UK. Since 1980 BP has closed three refineries, acquired and sold one and sold another whilst Shell has closed two and sold one. Esso has closed one refinery and retained Fawley.
Prompted partly by geographical portfolio changes and broader logistical and cost considerations, rationalisation took place in market presence and the distribution terminal network with several companies withdrawing from retail to become 100% wholesale suppliers.

Acquisitions, divestments, withdrawals and mergers further changed the landscape. BP acquired Mobil’s European downstream business, Elf Amoco’s business which was subsequently absorbed by Total, along with Fina, Gulf went to Shell, Texaco to Chevron and subsequently to Valero, whilst Total divested its retail and equity distributor business.
Distributor and retail changes
In 2001 BP divested its equity distributors to Q8 in England and to DCC Energy in Scotland. (The England business was subsequently acquired by DCC Energy). BP undertook a large scale rationalisation of its company owned filling station network, principally to larger multiple operators such as MRH, continuing to supply BP branded sites as part of its dealer network.

Esso has pursued the US branded jobber model of seeking buyers for geographic/regional clusters of its sites, appointing the successful bidders as branded wholesalers and entering into brand licence and term oil products supply agreements. Branding and associated support has been withdrawn from the company’s small authorised distributor network.

Having divested Shell Direct to DCC Energy in 2004, Shell’s retail presence has recently been enlarged with the acquisition of approximately 250 former Total sites from Rontec. DCC Energy has established a sizeable portfolio of independent dealer outlets predominantly under the Gulf and Pace brands.

On a wholesale basis, these companies continue to be substantial physical suppliers to independent branded dealers and to distributors/resellers. They also continue to dominate aviation fuel supply at Heathrow, Gatwick and Stansted airports.

Both Total and Texaco sold their equity distributor operations to DCC Energy and continue to supply to authorised distributor networks. Probably the most active company in this latter sector is Phillips 66 which continues to expand and support a substantial network of authorised distributors. The company is also seeking to add to its portfolio of independent Jet branded dealer sites.

In response to local pressures and to wider oil industry and corporate level developments, the years ahead are bound to witness further changes.