Petronas Takes Thai Markets by Strom

Market expansion

The raising of the oil drop Petronas trademark in pale aqua-green and white at so many street corners  in Bangkok, almost overnight, has left a strong impression of Malaysia’s economic presence in Thailand.

In 2004, Petronas made a strategic decision to buy over the Kuwait Petroleum International Company (KPC)’s Thai operations. "The taking over of KPC’s Thai operations brought a bonanza of 134 sites, including warehouses, vacant land and 117 KPC petrol stations, under the Q8 brand name, under Petronas’ s control," said Mr. Abdul Rahim Ismail, CEO of Petronas Retail (Thailand) operations.

This acquisition enabled Petronas to enjoy a substantial market share of Thailand‘s retail oil market virtually overnight. What Petronas had achieved in one move would have taken another comparable oil company many years to match in Thailand‘s highly

competitive retail oil market.

Petronas’s bold move surprised and intrigued industry players and analysts: since

liberalization in 1991, the Thai market has attracted more than 20 players. 

The fact that the Thai market has attracted no further new international players in

the last decade further attested to the perception of over-competition.

Petronas Thailand CEO Mr. Rahim points out, "Petronas made its debut in Thailand 

before the Asian Economic Crisis in 1997. Before the fateful economic crisis, we

opened five petrol stations in Petchburi, Pattaya, Chiangmai, Chanthaburi and Bangkok.

The Asian economic crisis, which came hard on the heels of Petronas’s debut into

Thailand‘s oil market reduced demand for petroleum products by more than 10% and

created excess capacity at the refinery level," said Mr. Rahim.

"High competition led to declining margins; prices fell from 1.7 Baht per litre to

less than 1.0 Baht," he added.

Suddenly, the petrol station business had become unprofitable. Petronas decided

to shelve future expansion plans. "Putting more outlets into the Thai market was

simply not a viable option at that time," explained Mr. Rahim.

If expansion was not a viable option, pulling out from the Thai market was even less

attractive. Petronas decided to wait out Thailand‘s economic recession.

The market downturn, characterized by excess refinery capacity and reduced demand

for oil products in Thailand, lasted until 2001.

By 2001, the economy had begun to show significant signs of bottoming out.

"Following the General Elections in 2001, the new Thai Rak Thai (TRT) Government

introduced price support in the form of diesel and gasoline subsidies. 

Margins began to improve," observed Mr. Rahim.

With subsequent improvement in margins, Petronas decided to expand its operations

in Thailand. "In 2004 Petronas acquired 3 sites for new petrol stations in Bangkok,

" said Mr. Rahim.  The fortuitous timing of the KPC sale gave Petronas the prime

opportunity it was seeking, to expand in the Thai  market.

Strategic directions

With such a large number if newly acquired assets Petronas faces a tough challenge to

maintain high standards and quality control. Apparently, not all the sites can be

effectively managed to return a profit. After careful consideration, several unprofitable

petrol stations in Bangkok and outlying provices including, Chiangrai, Khon Kaen and

Chanthaburi were marked for closure. Among the remaining petrol stations,

39 would be managed directly by Petronas,and  the rest would be dealer operated.

โ?œWe find that company-operated petrol stations often have better management in

terms of merchanding, cleanliness and discipline. โ?œsaid Mr. Rahimโ??. โ?œWe have recently

completed our branding for 103, company and dealer operated, petrol stations in

July 2005, โ?œhe added.

Petronasโ?™s marketing strategy is to create its own differentiation in the Thai market.

โ?œWe want to give the consumers more choice by offering a wider range of services

and products,โ?? explained Mr. Rahim.

Among the new products are Petronas brand lubricants. Currently, Petronas petrol

stations are selling Q8 brand lubricants. However, beginning in August 2005,

Petronas launched its own lubricants, under the trade names โ?œSyntiumโ?? and โ?œSprinta,โ??

in the Thai market. From 2006, Petronas will sell only โ?˜ Syntiumโ?™ and โ?˜Sprintaโ?™ lubricants

at Petronas petrol stationsโ?? Mr. Rahim added.


Shop expansion is another important part pf Petronasโ?™s marketing strategy.

The Petronas-operated mimi-martunder the brand name โ?œAlwaysโ?? follows the

opening of every Petronas petol station all over Thailand. Petronas intends โ?œAlwaysโ??

to be the locus of its market operations including, international Fast Foods

and local Fast Foods restaurants.

Petronas is currently negotiating with fast food franchises, both international and local.

These include: MacDonalds, A&W, KFC; and locally, Khao Kaeng, โ?œ94 Coffeeโ??

โ?œCoffee World,โ?? and pizza franchises.

โ?œAlwaysโ?? also plans to expand into car-care, beauty saloons, bookshops and Thai

traditional massage, โ?œexplained Mr. Rahim. โ?œ Our goal is to achieve a one-step service

for both family and cars in 1.5 year,โ?? added Mr. Rahim.

Market position 

Petronas appears to be on the right track in navigating the Thai market.

But Malaysiaโ?™s number 1 company is still not yet the number one market leader in

Thailand. Some of its older competitors are bigger than Petronas, ie in terms of

number of petrol stations in Thailand. The top three companies are: PTT, Shell

and Esso, in order of ranking.

However if market share is viewed in terms of average petrol station fuel sales per month,

Petronas ranks among the top 3  achieve the second highest ranking in terms of

fuel sales, together with JET and Shell โ?? a very respectable position indeed,

considering the short duration of time the current Petronas operations have been running.

โ?œGood locations, as well as the fact that 70% of our petrol stations are in Bangkok,

where average fuel sales are the highest, have enabled Petronas to achieve the second

highest ranking in terms of fuel sales, despite having petrol stations than our competitors,

โ?œ explained Mr. Rahim.

Petronas has emerged as the dark horse, in Thailand, closing up hard on the heels

of major industry players PTT, Shell and Esso.

 –By Jeffery Sng & Isabella Ho

Leave a Reply