Petron adopts 5-pt. strategy to maintain market leadership

Publicly-listed Petron Corp. is adopting a five-pronged approach to buttress its leadership in the local oil market.

In a recent presentation before oil experts in Malaysia, Petron president and CEO Motassim Al-Ma’ashouq said they need to respond to the needs of the time. "These responses form part of a broader review of our business philosophy," he said.

Al-Mashouq said first priority of the new business approach is: taking a more rigorous look at the company’s portfolio of assets. "In the past our investment strategies relied on assets to protect dominance," he said.

But now he said they would be exploring ways to leverage these assets through alliances with other entities, in areas like fuel imports and exports, bulk storage, liquefied petroleum gas (LPG) logistics, crude processing and even real estate.

He said at present, they are also re-examining the company’s business model for possible ways to unlock value.

"Today our refinery is bound up with our marketing business. But as the domestic market becomes more integrated with the region, there may be opportunities to achieve new supply chain efficiencies. For instance, our markets in the south, which are remote from our refinery, maybe more economically served from outside the country," he said.

The Petron executive also said they are assessing the idea of exploiting their substantial storage capacity and distribution network to develop a possible role as wholesaler.

These moves, he said, are necessary as the new oil players continue to eat up a substantial portion of the market.

The market share of new players more than triples in four years since the Deregulation Law was passed in 1998, from 3.4 percent in 1997 to 11.4 percent in 2001.

In the LPG market, the share of new oil players has risen to 26 percent and its presence in the industrial trade or the commercial accounts also increased to 13 percent.

Just before the deregulation in 1996, he noted that there were only 87 depots in the country with a total capacity of around 10 million barrels. In 2001, he said there were 142 depots with a total capacity of nearly 13 million barrels or an increase of more 30 percent.

The increase in capacity, he said, is not proportional to the growth in local demand. "Oil consumption declined over the past years because of significant fuel substitution in the power sectors, and weak demand in the household and industrial sectors," he added. "But what is more telling is the growth in product imports relative to total country demand." – Donnabelle Gatdula