Domestic oil's brighter days

Earlier this year, chairwoman Pissawan Achanapornkul said annual demand could drop. But yesterday, she changed her mind, citing the economic recovery in this half of the year.

Shell has revised its target for oil-retailing volume up by 1-2 per cent from 4 billion litres last year.

However, next year's domestic oil outlook was difficult to pin down, as it is unclear whether the recovery would follow a "V" or "W" shape. But if the economy continues its recovery pace, demand would pick up next year, she said.

Half of Shell's oil retail sales by volume is diesel, which is used by industry.

Shell projects demand for diesel this year at 2 billion litres, unchanged from last year.

"Industrial oil demand in the first half dropped by 15 to 20 per cent because of the economic crisis and the switch from fuel to natural gas.

"However, demand is rising due to the economic recovery in the third quarter.

And our premium diesel is one factor that helps maintain the demand," she said.

Shell's oil-retailing revenue was impossible to estimate because of the fluctuation of global oil prices, she said.

"Revenue this year should not be better than last year because of costs and low marketing margin. Oil retailers in Thailand have to rely on the demand of users to boost business performance," she said.

The premium fuel called V-Power diesel B5 and V-Power gasoline 95 are also helping Shell's oil-retailing business, she said.

"Our products have had a good response from drivers because of their high quality. We found that customers prefer filling up with V-Power gasoline 95 for motorcycle and car maintenance and driving power enhancement," she said.

Shell premium petrol 95 has 5 per cent of the total petrol market. Consumption was lower than for gasohol 95 because the gap between the gasohol-95 price and the 95-octane petrol price was further widened, she said.

The company was not concerned by the wide gap, but rather the low marketing margin of diesel B5. Its marketing margin is Bt1 per litre while diesel B2 is Bt1.20.

The government should push diesel B5's marketing margin to the same level of B2, if the government wants to promote B5 consumption, she said.

Shell sells only diesel B5, while other retailers sell both B5 and B2. It also stopped selling 91-octane petrol early this year but provides premium 95-octane petrol and gasohol 91 and gasohol 95.

Shell is ready to produce gasohol E20 once the government ends the sale of 91-octane petrol, she added.