LONDON -- Oil company Shell is planning a nearly 25% expansion of its already massive global convenience-store network to get a jump on the approach of peak oil demand.
In a recent investor presentation, London-based Royal Dutch Shell outlined its downstream strategy, supported by an annual $7 billion to $9 billion investment.
“Downstream is helping Shell to thrive during the global shift to a lower-carbon energy system,” said John Abbott, downstream director for Shell. “As the energy system evolves, our marketing businesses will provide agile platforms for meeting the changing needs of our customers.”
Shell’s retail and global commercial marketing businesses supplied about one-half of its downstream division’s earnings over the past five years. Through a combination of growth strategies, it hopes to create an additional $1 billion in annual earnings by 2020 and $2.5 billion more by 2025.
These strategies include:
- The addition of 10,000 new locations, with 5,000 in the high-growth markets of China, India, Indonesia, Russia and Mexico, where Shell recently opened its first branded locations but is lagging other major oils. “These markets will produce half of the oil (demand) growth by 2025,” Istvan Kapitany, head of retail for Shell, told investors.
- 5,000 new c-stores and upgrades to existing locations.
- The increased development of its premium fuels and expansion of its fleet solutions business.
- New digital and mobile offers. In the United States, Shell recently introduced the ability to make in-store payments through its mobile app and accept Chase Pay. And in Europe, Shell has been testing an on-demand fueling service accessed through a mobile app.
Through these measures, Shell has set a target of serving 40 million daily customers across 55,000 locations worldwide, compared to the 30 million customers at its 44,000 branded sites today. In the United States, Shell has 14,000 branded locations.
Shell considers its retail operations a means of locking in demand for its fuel in advance of an expected peak in oil demand, which could hit as soon as the end of the next decade, Reuters reported. Pressuring this peak is the growth of electric vehicles (EVs), a market that Shell is also testing as it installs EV charging stations at locations in Europe, as well as hydrogen fueling locations.
Biraj Borkhataria, an analyst for RBC Capital Markets, told Reuters that Shell’s aggressive c-store growth plan could face some strong headwinds as EVs threaten to erode fuel demand over the long term.
“We are more skeptical on Shell’s plans in retail, as the market is fiercely competitive and the ongoing threat of EVs could put some of that earnings stream at risk,” he said.