Oct 13, 2012

Vietnam - Shell Gas the 3rd global LPG brand to leave VN

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Dutch energy and petrochemical company Shell has pulled its LPG business out of Vietnam after having transferred its entire share in a joint-venture in Hai Phong, and a Ho Chi Minh City-based company, 100 percent of whose stake it held, to Thailand’s Siam Gas Co.

Shell Gas has thus become the third global liquefied petroleum gas brand to withdraw from the Vietnamese market, which is considered to have high potential with an average growth of 10 percent a year.

In 2006, Exxon Mobil Unique Vietnam sold its entire gas segment with the Mobile Unique Gas brand name to Malaysia’s Petronas Co, while BP Gas, a unit of the UK Castrol BP Petco, officially ceased operation in Vietnam as of January 2009.

The stake transfer is in conformity with Shell’s business strategy, which is focusing on fewer markets but at a larger scale, Shell Gas Vietnam said in a statement sent to its dealers nationwide.

As for the development strategy in Vietnam, Shell said it may focus on the lubricating oil market, and is also eying the oil and petroleum sector.

Shell has been playing in the local LPG market for more than ten years, but its investment and effort didn’t pay off.

Although Shell Gas is a reputable brand name in the country, it has gained unwanted business results as revenues were not enough to cover expenses.

Shell Gas was once a typical example in setting up a dealer network that only sells its products.

But the system had to gradually narrow down, and the company ended up reluctantly allowing the dealers to sell gas cylinders of other brand names, a move it was forced to make in order to adapt to the local market.

But the change proved useless as Shell had to merge all of its office in Hanoi to HCMC to cut expenses in 2010, and now, pull out of the entire business out of the country.

Harsh market

The pulling out of global brand names, however, is not seen as a positive sign for local LPG suppliers, given the real reason that has driven these international firms out of Vietnam.

That is, according to analysts, the rampant, uncontrolled phenomenon of illegally extracting gas in Vietnam.

Elf, Total, BP, and Shell have earmarked huge expenses to protect their brand names in the local market, but efforts have proved ineffective as the market remains a mess, and foreign firms have no choice but to accept it.

Some 40 percent of the cooking gas cylinders on the market are not returned to suppliers once they are used up, which opens the door wide for the illegal extracting rings.

Economics police have taken action, and several violators have been fined, but the phenomenon has yet to be fully curbed.

Whenever authorities crack down on an illegal gas extracting facility, two or three more are set up in other locations, with even busier operations.


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