Chevron's Steady Course

Bucking trend, oil company intends "to remain integrated," execs say

Christine Lavelle, Senior Editor/Snacks & Candy, CSP

SAN RAMON, Calif. -- While other major oil companies are leaving retail in their rearview mirrors, that's not the case for Chevron Corp. "We intend to remain an integrated company," Dave Reeves, president of strategy, technology and commercial integration, told members of the trade media in a gathering at Chevron headquarters this week.

This strategy sets Chevron apart from other multinational oil companies such as ExxonMobil and ConocoPhillips, which have chosen to exit the retail business and eliminate company-operated stores. Indeed, Chevron executives see that as an [image-nocss] opportunity to approach those dealers and bring them to the Chevron brand.

Having c-stores helps the company hold market share by adding a strong brand to the fuel offering, said Colin Parfitt, vice president of Chevron's Americas West and its retail sales channels. And store revenues can also help boost profits as competition increases in the fuel market.

Chevron's operation of stores enables it to test new concepts as well as set and maintain standards that dealers and franchisees follow. But the company wants to accomplish its retail growth goals by adding franchise operations.Of Chevron's approximately 9,000 stations in North America, 410 are company owned and operated, with about 400 in the U.S. and 10 in Latin American.
"I think an average of 150 per year is doable," said Parfitt. The company anticipates expansion on the West Coast, where Chevron has the greatest competitive strength, he said.

Most ExtraMile locations are in California (northern California, Los Angeles basin and San Diego), plus 62 in Seattle and 27 in Portland, Ore. Florida is home to 21 sites. These locations align with the company's U.S. refineries, and growth outside those regions is not likely.

Refineries operate best when they operate at full capacity," Parfitt said. Fuel demand has fallen--a trend that is expected to continue--so tapping the capacity of the company's six refineries and joint-venture terminal operations will be best accomplished through growth at the retail end. That means more stations and more stores to sell more Chevron-branded fuels, and more marketers to sell additives and other fuel products.

With the capacity to produce about 2.7 million barrels of crude per day, Chevron has ample refining capacity to meet demand and support the company's retail growth targets, Reeves said.

After some major restructuring in 2010 that included the sale of the Pembrook Refinery in the United Kingdom, Reeves said the company's portfolio "is pretty close to where we want to be," and no other sales are anticipated. The fact that all of Chevron's Asia Pacific refineries are joint ventures not wholly owned by Chevron also spreads the risk in matching supply and demand. Chevron wholly operates seven North America refineries.

Christine Lavelle By Christine Lavelle, Senior Editor/Snacks & Candy, CSP
View More Articles By Christine Lavelle