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.
TUOI TRE
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