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Business

Asia’s gasoline retail seen to slow down in next 2 years

Danessa Rivera - The Philippine Star

MANILA, Philippines — Asia’s oil and gas industry is bracing for slowdown in the next two years due to the coronavirus disease 2019  (COVID-19) pandemic, global consultancy firm Oliver Wyman said.

According to an insight piece by Abhi Bhuchar, a partner for energy practice of Oliver Wyman, Asian demand for oil and gas is expected to fall by as much as 17 percent this year.

“That translates into a demand drop of five million barrels a day. The region’s gasoline demand is expected to decrease 21 percent, while diesel will be down 15 percent,” Buchar said.

The 2021 oil demand forecast is also expected  to remain three percent below the 2019 peak.

“Asia will not top its peak again until 2022, when we’re projecting a one percent expansion,” Buchar said.

Despite this negative outlook,  fuel retailing will benefit from consolidation and major upgrades, he said.

Buchar said the current rock-bottom valuations have made fuel retail assets attractive investments for private equity and big oil and gas players.

“This is particularly true in Southeast Asia where the retail sector is made up of unbranded mom-and-pop operations limited in size and scope. This creates an opportunity ripe for consolidation and investment,” he said.

“Chinese companies and Southeast Asian family-owned conglomerates are already starting to recognize the potential in countries like Vietnam and the Philippines,” he said.

For upgrades, Buchar said retail operations are expected to implement more digitization and automation programs.

“With the consolidation of properties, Asia is likely to see increased investment in digitization and modernization of retail service stations,” he said.

Going with cashless or touchless payment has become important especially in the wake of the COVID-19 pandemic.

“While innovation is already rampant in markets like South Korea, Japan, and Singapore, gasoline stations in the rest of Asia don’t offer many products or services beyond fuel. Here, investment could change the business model, adding convenience stores and fast food, as well as the use of applications for not only finding gas stations but also for ordering, pre-paying, and paying,” Buchar said.

Another upgrade in retail stations is the addition of offerings apart from fuel.

“Besides digitalization, this is likely going to involve an expansion of what’s being sold, from offering many different types of fuel to becoming a mall for the kind of staples people need but no longer want to go into a store to retrieve,” Buchar said.

These developments will change the competition landscape in the oil and gas sector, giving an edge to oil companies in the next five to 10 years.

“As demand recovers, the competition between rivals will become more intense and customer loyalty and end-user relationships will become more important than ever before. While people’s interaction with oil companies is going to change, visiting petrol stations will still be an anchor to the overall customer journey for the foreseeable future,” Buchar said.

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