BP deal leg-up towards GAS goal of 200 stations

By CHRIS DANIELS energy writer

Oil giant BP has signed a deal with independent gas station supplier Gasoline Alley Services (GAS), which could mean 140 stations replacing the green and gold with orange and black.

GAS supplies 35 mostly smaller service stations in New Zealand.

Yesterday's agreement, which requires individual BP station owners to agree to have their operations rebranded, will occur over two years, with BP replacing Caltex as fuel supplier to all GAS stations.

GAS director Phil Murray said the strategy was to avoid competing head-on with the major retailers. The BP deal would ensure it could offer GAS retailers "viable long-term supply agreements".

"We had a goal, aiming for up to 200 stations that would give us national coverage and a higher profile. This just gives us a big leg-up to get to that point and it's likely to happen within the next two years."

BP spokeswoman Diana Stretch said no independent station owners would be forced to move over to GAS.

Stretch said almost all of the 140 BP independent station owners had between a year and 18 months left on their contracts.

The change allowed BP to focus on its "core offers", BP Connect and "2Go", which required significant investment and were higher profile.

Independent stations have short-term contracts with the big oil companies, such as BP, which own the tanks and pumps. When these deals come up for renewal, the oil companies can pull out their tanks, leaving a hole in the ground and a big investment needed before any potential competitor can set up shop.

Some small towns have been hard hit by such decisions, with the big oil companies claiming that potential environmental concerns mean they cannot simply sell the tank to independent station owners.

All GAS owners own their own tanks and pumps and have longer- term supply deals with Gasoline Alley Services. There is no franchise fee or commission, just a deal to supply fuel. Station owners decide what price to charge for the fuel, which is supplied from BP at a discount to Gasoline Alley Services.

Retailers will end up owning the tanks, paying what Murray calls "a minimal cost" for them.

He said there was a need for some new investment for the company, and the hiring of new staff. The deal, essentially a supply situation, did not require a large amount of new money to be spent. Cashflow demands would change, with the "bigger numbers" involved.

The little guy

* Gasoline Alley Services (GAS) was set up in 1999, supplying Caltex fuel to small independent stations.

* The New Zealand-owned company has three shareholders. Its national business manager, Phil Murray, and pricing manager Trevor Wilson own 10 per cent each. Christchurch-based investment company Mead Investments owns 80 per cent.

* It pitches itself at the independent stations, saying it can help remodel and relaunch them in niche markets.