BP Refocuses

Strategy change has the Major Oil company pulling out of retail in several states

Greg Lindenberg, Editor, CSP

CHICAGO -- BP Products North America has informed its jobbers of plans to focus its U.S. fuel supply operations to core areas where it has a strong market position and proprietary fuel supply.

The strategy shift involves BP's use of some terminals in the Plains and Gulf Coast areas, BP said. The areas where BP will no longer offer branded retail gasoline and diesel sales are in Louisiana, Texas, Wyoming and North Dakota, the company said in a copy of the notification sent to jobbers obtained by CSP Daily News.

BP has about 13,000 [image-nocss] U.S. retail sites, including those branded ARCO. The move does not affect ARCO sites, which are all located west of the Rockies. Approximately 350, or less than 3% of these sites, could be affected by BP's decision to refocus its supply areas, said the company.

Notification started on July 20 and continued last week, BP spokesperson Valerie Corr told CSP Daily News. The move was first reported in Oil Express.

BP said it will continue to offer and grow its fuel supply operations in areas in the West Coast, Midwest, Southeast, Mid-Atlantic regions, including New York and New Jersey, where it has an advantaged refinery and terminal network.

To focus its fuel supply operations, BP plans by April 2008 to end gasoline and diesel exchange or rack purchase agreements at some product terminals where it does not have an advantaged position in the Plains and Gulf Coast states. These terminals supply less than 2% of BP diesel and gasoline sales in the United States and are where the company experiences about 35% of its gasoline and diesel supply runouts. These terminals are not owned, operated or supplied directly by BP and are located at the edges of the company's core fuel supply areas.

BP's customers have told it that supply reliability is a top priority for them, said the company. The oil company's fuel business objective is to provide jobber and commercial customers with reliable and cost-effective supply in areas where BP-branded products are offered, it said. The company said it has determined that it cannot effectively meet its strategic goal of supply reliability from the terminals where it has decided to end fuel supply agreements.

BP is working with its affected jobbers to develop transition plans, said the company. Where possible, BP jobbers will be supplied by a terminal operated by BP. The jobber-supplied retail sites that will no longer receive BP-branded product will be debranded and receive fuel supply from other companies.

The company has decided to provide impacted marketers eight months to complete debranding of affected sites, which exceeds the minimum 180-day notice required by the Petroleum Marketing Practices Act, it said.

The company said jobbers that decide to debrand impacted sites early can execute a mutual cancellation agreement with a minimum of 30 days advance notice of the termination date to BP.

In recognition of various transition issues, the company told impacted jobbers that it will:

Continue to pay outstanding jobber outlet incentive funds due on sites that need to be debranded until April 1, 2008, or until sites are debranded whichever is sooner. Lift any gasoline deed restrictions on any site that needs to be debranded that BP sold to a jobber and that has a restrictive covenant for BP-only fuel sales. Reimburse jobbers $2,400 for each site that needs to be debranded at which BP's Commlinx communications system has been installed. Pay jobbers that do not choose to brand a site with a third-party's brand a $3,500 per site de-image allowance.

Also, BP will not require any repayment for sites that are required to be debranded of jobber outlet incentive funds, unamortized reimage funds and unamortized Marketing Assistance Plan funds.

Other BP businesses and operations in the United States are unaffected, said the company. These include oil and natural gas exploration, production and refining, lubricants, aviation fuels, power generation and alternative energy.