BANGKOK: Malaysia’s national petroleum firm Petronas (Petroliam Nasional Bhd) has thrown in the towel in Thailand’s oil retail market, deciding to sell all its assets here to the local oil retailer Susco Plc.

Executives of both sides agreed on the asset sale and purchase agreement late last week. Susco joined the bidding for Petronas Retail’s 100 petrol stations in Thailand early this month and was selected as a preferred bidder.

Petronas Retail (Thailand) entered Thailand in 2005 by acquiring the assets of Kuwait Oil, whose brand is Q8. Petronas is a state-owned entity with assets worth nearly RM500 billion (five trillion baht).

Petroleum analyst Manoon Siriwan said the move does not surprise him, as retail oil in Thailand is a playing field for only the tough ones.

“I’m not surprised at all. I would say there are quite a few oil companies suffering from very narrow margin, especially the ones that have no refinery production here,” said Manoon.

He said the high volatility of crude is a major factor, while the Thai government interfering by capping the diesel price at a low level to attract votes.

The situation of retail oil is worse this year since the average price of crude has risen while the government has kept the cap on diesel prices at the same low level, intensifying competition among large oil retailers.

Manoon said the expansion by small oil companies such as Susco usually happens because they want to prepare themselves before jumping into the retail gas business including cooking gas and compressed natural gas, because of a higher margin.

“It’s possible these small players will soon sell gas because of the higher margin,” said Manoon.

He said Susco may want to own Petronas assets in Thailand, as they are in the residential areas in Bangkok and Greater Bangkok, while Susco’s stations are mostly in suburbs with trucks and taxis their regular clients.

Chairit Simaroj, the managing director of Susco, said the company has a sufficient mix of cash and bank loans to fund the acquisition.

The transfer of assets is expected to be finalised by November.

“The acquisition will integrate our oil pump business. Most Petronas stations are located near housing areas in Bangkok’s suburbs, while most Susco oil pumps are on highways,” he said.

The purchase will bring Susco’s pumps to 244.

Chairit said Susco’s revenue from the retail oil business will jump by 76.5% to 30 billion baht by the end of next year, from 17 billion last year.

The firm plans to allocate about 50 million baht a year for facelifts to the Petronas stations starting early next year. Susco also plans to find convenience store operators to operate Suria retail stores at Petronas pumps after the renovations. — Bangkok Post

This article is appeared in The Edge Financial Daily on 19 September, 2012.