'Big Oil' Exiting Canadian Gas Station Business

Valero spinoff of Ultramar takes number of refiner-marketers from nine to eight

Ultramar Canada (CSP Daily News / Convenience Stores / Gas Stations)

LONDON, Ontario -- Canada's gas stations are increasingly becoming divorced from the crude oil producing and refining sectors that have traditionally maintained a "wellhead to gas tank" vertical integration of assets and operations, according to a recent survey of Canada's retail gasoline facilities by petroleum consultancy MJ Ervin & Associates.

The total number of retail gasoline stations in Canada stands at 11,849 as of Dec. 31, 2013; this represents a continuation of a downward trend since 1989, when Canada had more than 20,000 gas stations.

"We have seen virtually no increase in the retail gasoline margin in over 25 years," said Michael Ervin of MJ Ervin & Associates.

"Retail gas stations are no longer seen as a strategic asset for integrated oil companies," he said, since refiners typically have ongoing gasoline supply agreements with several third-party retail chains who themselves do not operate refineries.

Only 15% of Canada's gas stations come under the direct price control of the three major oil companies (Shell, Suncor and Esso), although their brand names appear on 37% of all gas stations, many of which are price controlled by the local dealer, or by a regional marketer holding the rights to use the major brand on its sign and pumps.

As of Dec. 31, eight integrated refiner-marketers operated in Canada, representing a total of 13 refineries across the country (this does not include the Valero refinery in Quebec). During 2013, the number of integrated refiner-marketers declined from nine to eight, with the split of Valero, the owner of Ultramar, into separate refining and marketing companies with the spinoff of CST Brands. By contrast, there are more than 60 petroleum marketers in Canada who do not operate refineries, and more than 90 distinct "brands" of gasoline.

These "non-refiner marketers" represent 81% of Canada's retail gas stations, up from 70% in 2006, and reflecting a shift in retail gasoline ownership from refiners to non-refiners.

A growing segment of this sector is the "big-box" retailer, which has proliferated over the past decade and through competitive pricing and other incentives, has contributed to the overall decline in conventional gas stations.

The study, entitled the National Retail Gasoline Site Census 2013, is a research project by MJ Ervin & Associates and is the only comprehensive enumeration of the number of retail gas stations in Canada.

MJ Ervin & Associates (a division of The Kent Group Ltd) is a London, Ontario-based consultancy specializing in the petroleum refining and marketing industry. MJEA publishes the Weekly Pump Price Survey, Canada's authoritative source of petroleum prices, available at no cost on its website, www.kentgroupltd.com.

Part of CSP's 2014 Convenience Top 101 retailers