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What the future of the petrol station looks like, from renewable energies to driverless cars

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Lauren Davidson12 JUNE 2016 • 11:44PM

It’s a wonder Istvan Kapitany, executive vice-president of retail at Royal Dutch Shell, gets any work done. The view from his office on the 22nd floor of Shell’s headquarters on the South Bank looks out over some of the most impressive landmarks in the capital, including the London Eye and the Palace of Westminster.

Though not at the top level just yet – the Shell Centre has 26 floors – Kapitany has certainly climbed his way through the ranks since joining Shell in 1987 as a petrol station manager in Hungary, his home country.

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“Many of us here at Shell are so-called lifers – we’ve worked for the company a long time,” Kapitany says. “You don’t forget where you started, even if you get a bigger portfolio.”

He now looks after a global network of around 43,000 service stations, where half a million staff members serve 25m customers across 70 countries every day.

“It’s a mind-bogglingly high number,” says the self-dubbed Budapest boy, thumbing the silver Shell pin that sits on his lapel. “This is one of the biggest retail networks in the world, with more stores than Starbucks or McDonald’s.”

Every quarter – lest the lofty view should become too distracting – Kapitany spends a day working at a petrol station, not just “smiling and giving advice”, he says, but doing a proper 12-hour shift from 6am to 6pm.

“We don’t have any customers in this building,” he says, gesticulating at the space around him. “It’s very difficult to see the real issues if you sit inside an office.”

Many of the issues facing fuel retailers today can be refined down to one slippery challenge: how can the petrol station be reinvented for a world of “lower forever” oil prices, intensifying environmental concerns and the anticipated arrival of driverless cars?

Shell does not disclose the financial details of its retail business, except to say that it processes more than $6bn worth of customer transactions every day, but its forecourts seem to have been faring better than the rest of its business in light of tumbling oil prices.

Shell’s total revenues fell by 37pc to $272bn in 2015, with earning from its upstream operations swinging to a loss of $5.7bn from an income of $15.8bn the previous year. However, earnings from Shell’s downstream operations, which includes its retail business, tripled last year to $10.2bn.

Brian Madderson, chairman of the Petrol Retailers Association, explains that low interest rates and low inflation have helped to put a record number of new cars on Britain’s roads, with cheap oil driving a growth in traffic and fuel consumption. Road fuel demand grew by 1.1pc last year, beating expectations of “an irreversible decline in fuel volumes in the UK”, Madderson says, but petrol prices continued to fall by 2.7pc.

“What all of the forecourts are trying to do, both independents and the large companies, is to develop alternative revenue streams to fuel.”

This is a point of pride for Kapitany, who is Shell’s lead director for its Brazilian joint venture Raizen, which produces fuel from the agricultural waste left over after harvesting sugar cane. Last year, Raizen produced more than 2bn litres of ethanol from Brazilian sugar cane, which emits 70pc less CO2 than conventional petrol. 

“We are the number one company in biofuels in the world – we sell more biofuels than anyone else,” Kapitany claims. “We are also at the forefront of hydrogen innovation.”

Shell is part of a joint venture with Daimler and others to commercialise hydrogen gas for powering hydrogen fuel cell vehicles, which are electric cars that have a range nearer that of conventional cars than battery-powered cars. The Berlin-based joint venture has eight sites and plans to have hydrogen-fuelling pumps at 400 locations across Germany by 2023.

“There are areas where it’s clear that there is a growing demand for battery electric cars, particularly in California and parts of Holland, so we’re working on developing supercharging technology, too,” Kapitany says.

While the forecourt of the future will most likely sell alternative fuels to power vehicles, Kapitany also expects renewable energy to play a bigger part in the operation of the stations themselves. Shell is running trials in China to generate all the energy needs of a site from solar panel canopies.

Reimagining the purpose of the forecourts and increasing the convenience they offer consumers is at the core of Kapitany’s attempts to future-proof Shell’s retail business.

In today’s digitally connected on-demand economy, retailers must work harder than ever to attract customers. This is particularly true for petrol stations, where price and location have always been more important than brand loyalty, amid intensifying competition from supermarkets. Almost every UK Shell station now has a Costa coffee concession and around 30 have a Waitrose store attached.

Kapitany says Shell has spent “quite a bit of money” since 2012 revamping 400 of its UK petrol stations – making them larger, adding parking spaces, installing DHL pick-up points – with plans to upgrade 50 more this year. Total sales at the refurbished stores have increased by 15pc and food sales have jumped by 49pc, with shop margins 19pc higher as customers stock up on premium products. 

Kapitany pinpoints this development as the key to the forecourt of the future: service stations need to attract customers even when they don’t need to refuel.

“We are seeing a huge number of people coming to service stations who are not filling up their cars. They are coming in to buy breakfast, to get a cup of coffee, to get their car washed. Their need for convenience retail is more frequent than their car’s need for fuel.”

Shell sold 60m cups of Costa coffee last year, which Kapitany calls “a huge development”. He says there are Shell-branded stations that are already making more money from selling products other than fuel. With that in mind, Shell is experimenting with different ways of luring customers to its stores and encouraging them to spend more time there. The company has two sites in Bangkok that sell only V-Power, Shell’s highest quality fuel, alongside a luxury cafe. Each customer gets two attendants – one to serve them and one to service their car. In Luxembourg, Shell operates the world’s largest petrol station, servicing up to 25,000 customers per day.

Increasing the retail offering of service stations will become even more important as cars become more efficient, needing to refuel less frequently, and driverless cars become commonplace.

“Autonomous cars do not mean, of course, that humans are not there. The cars are still taking people from A to B, so it’s very important that service stations are suitable for those type of cars – but also remain relevant for the people who are sitting in them.”

Despite the many uncertainties surrounding the future, Kapitany feels convinced that there will be a place for petrol stations.

“I imagine that we would offer additional services to consumers going forward that for the time being we are not even aware of, ones that might be developed in the next couple of years,” he says.

“We do not know how the world will be in 20 years’ time. If I knew this, I wouldn’t be sitting here doing this job. I would be a very rich man.”

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