Drive to diversifyFebruary 13, 2020
John Gormandy, acting CEO of the National Petroleum Marketing Company (NP) of Trinidad and Tobago, talks to TOGY about changes and challenges in the local oil and gas market, plans for expansion into new markets and the company’s focus for 2020 and beyond. NP is the country's state-owned petroleum marketing company.
NP has been called “the most diversified petroleum marketing company in the English-speaking Caribbean.” What contributes to that distinction?
We are indeed a diverse entity. We have four main lines of business: retail of automotive and industrial fuels, manufacturing of automotive and industrial lubricants and greases, wholesale and retail of LPG, and aviation fuels and marine bunkering.
In the downstream sector, we command the largest retail service station network in the English-speaking Caribbean with approximately 115 service stations and counting, which together account for almost 70% of our revenue. This is one of the regulated areas we operate in, in addition to LPG. With the exception of the exploration sector, the other two business lines are in non-regulated areas.
How has Petrotrin’s closure impacted NP?
Petrotrin’s closure has flagged some challenges for us, mainly in the area of LPG. Before the closure, Petrotrin would have covered the LPG subsidy, which amounts to approximately USD 70 million annually, and this has now become NP’s responsibility. Apart from this, we have been able to make the necessary adjustments resulting from the changeover to Paria.
Do you have plans to expand into Guyana?
We want to open an office in Guyana, so that is on the horizon for 2020. We have supplied that market with our quality lubricants and greases since the 1990s, and we have seen a resurgence in 2004. Guyana is our largest potential market for lubricants, and we have partnered with a subsidiary of MACORP [Machinery Corporation of Guyana], Industrial Supplies of Guyana. MACORP is the local agent for Caterpillar Equipment and commands the lion’s share of the heavy equipment market in Guyana.
Are you looking into markets in other Caribbean countries as well?
We already have a terminal facility in Dominica which supplies products to NP service stations and industrial clients, and we also sell aviation fuel at the country’s two airports.
We are also exploring other markets like the Dominican Republic, where we once had a presence with our range of lubricants, and will be looking at re-establishing our presence in that market.
Despite 70% of your revenue coming from retail liquid fuel distribution, you still highlight alternative fuel vehicles as a theme on the horizon. Are more hybrid and electric cars coming to Trinidad and Tobago?
We have seen an increase in the importation of hybrid vehicles and with the government’s focus on making CNG the preferred fuel option, it was no surprise to see a moderate decline in motor fuel sales. As a result, and in anticipation of this trend continuing, NP had started to look at alternative revenue streams.
Since we have as one of our greatest assets the largest retail network, spanning throughout the country, we are looking at how we can integrate new services into these sites. We are still in the early stages but will be actively pursuing opportunities to partner with private sector companies in making these sites more viable and bearing in mind the changeover to hybrid, CNG and possibly electric vehicles.
We are planning ahead and looking at all the options.
Do you believe that the closure of some Unipet stations was a form of protest or just due to low margins?
They are both related as I believe Unipet may have reached their limit and thought this was the best way of getting their message across, which if true I’m certainly not in agreement with. However, the margin in T&T is only 4% while those across the region average 15-20%. The high tax structure also makes the industry financially challenging.
NP has raised the issue of inadequate margins with the MEEI [Ministry of Energy and Energy Industries] several months ago and we await their feedback. Since receiving our proposal, the ministry has requested further details on the operating costs of service stations in several categories. This tells us that they are looking into the matter and we expect that a position should be finalised by the end of our fiscal year which ends in March 2020. Nevertheless, I believe Unipet’s closures could be viewed by some as a form of industrial action that was designed to highlight the issue.
While I fully understand the need to address this issue, and assuming that this was in fact a protest action by the service provider, such actions would have only served to endorse the position as to why such a critical service cannot be placed entirely in the hands of the private sector. Imagine if the wholesaler(s) were all privately owned and tomorrow there is dissatisfaction with the margins – what do you think could happen? The entire country could be held to ransom.
The method chosen by Unipet if true, may have been premature and only serves to cause unnecessary hardship to the motoring public and NP does not condone this as we see our role as ensuring a regular supply to all communities regardless of the business environment or their location. Notwithstanding that, during the duration of the impasse, NP was able to demonstrate its market dominance by adequately meeting the needs of the country through its extensive distribution chain and service station network.
We presently supply some of the rural areas in Trinidad that are not feasible due to low volumes and where there is no competition. Such sites do not even offer a breakeven position, but we continue to provide the service regardless. Tobago is another example of this as the cost of transporting fuel to our sister isle is done at a tremendous cost to NP but we have a social responsibility to the citizens of Trinidad and Tobago. We will continue to work with our regulators with the hope that some redress will be forthcoming.
How do you decide where new retail sites will go?
NP once had a monopoly which included approximately 220 service stations across the country, so we have the data to understand historically what sites/areas generate what level of income. Fast-forwarding to the present, the demographics have changed significantly. There are new housing developments, new highway extensions and more vehicles on our roadways.
All of these factors inform our decisions about where our next sites will be, so we liaise with the different ministries to get information on plans for new developments etc. and this is assessed by our network planner and once feasible, approval is then sought from the company’s board of directors and relevant state agencies. In addition, all new-to-industry sites are outfitted with our Quikshoppe brand and we will also be extending this to include other services. It’s no longer just about fuel; you have to have those complementary services as well.
What new products and initiatives should we expect to see from NP in the near future?
Given that one of the areas of focus is product development, we would have extended our product portfolio to include fuel additives for gasoline and diesel applications, and we have also added four-stroke motorbike mineral and synthetic lubricants, complex greases and DOT 3/DOT4 brake fluid to the product range, to name a few.
On the LPG side, we will soon be introducing composite cylinders which weigh about 60% less than the standard steel cylinders, are safer and far more attractive, and have about a 25-year lifespan.
We are also looking at new sites for retail stores. We will have a flagship station in Preysal by September 2020, which will be our biggest site for both fuel and CNG. This initiative is being done in partnership with NGC CNG. We will also have another flagship station in Mayaro by November 2020.
On the bunkering side of the business, we are looking at establishing a presence in Labidco, Point Galeota and Port of Spain. This will allow us to increase our presence in the bunkering industry and will position NP as a preferred service provider for the marine sector.