After four years of losses, Anglo-Dutch giant Shell, the world’s second-largest oil corporation after ExxonMobil (US) estimates to make profit from its Romanian operations, under the International Accounting Standards.
Each of the two companies through which Shell operates on the Romanian market, Shell Gas Romania – liquefied petroleum gas (LPG) and Shell Romania SRL – fuel retail, expects to conclude the current fiscal year “in the black.”
Shell’s Romanian business will amount to approximately $250 million this year, up 50% from the previous year. The sales growth is mainly fuelled by Shell Romania SRL’s gas station network, whose sales are estimated to be worth $200 million compared to $126 million last year. The LPG business is expected to grow from $40 million in 2002 to $50 million in 2003.
“If we look at the results, I think one can see a blend of the internal streamlining of our operations and the changes in market conditions. We took action to cut costs,” Joel Maes, Shell’s president for Romania told Ziarul Financiar.
He added the reduction in the number of Shell stations on the retail market from 81 to 58 following the sale to MOL Romania, the branch of the Hungarian oil group, did not impact on this year’s results, as transfer was not over yet.
Shell has not turned a profit under the IAS on the Romanian market since 1999. International companies have repeatedly warned they are losing money because the domestic fuel market is not liberalised, and the market leader, SNP Petrom sets prices that are not related to the international oil quotes. Things have started to change this year, as both Agip and LukOil announced they were hoping to end the year in the black.
Shell’s losses have been centred on the gas station network primarily. Operating on this segment since 1992, Shell had seen the most significant expansion of all the multinationals on the market, reaching 81 stations. This used to be the second-largest gas station network on the market after SNP Petrom’s, until last year. Shell Romania SRL in 2002 managed to cut losses down to 3.3bn ROL ($100,000) from the previous year when they reached 113bn ROL ($3.8 million).
After almost six months of secret negotiations, Shell sold 23 stations to MOL this summer, following a deal estimated at $20-$25 million. The Anglo-Dutch group sold the stations on the grounds that they were not compliant with its efficiency standards.
Petrom is the gas station market leader in Romania, with some 695 units, followed by private Rompetrol Group and the Russians at LukOil – more than 150 stations each, MOL (Hungary) – 73 (the 23 bought from Shell included), Shell – 58 stations, OMV (Austria) 50, Agip – 20, with 600 to 1,000 other stations held by private operators. The entire distribution network comprises about 2,000 stations, certain estimates show.
Shell Gas Romania, a joint venture established by Shell (56%) and Petrom (44%) will conclude the year with $50 million turnover. adrian.mirsanu@zf.ro