Shell sale of Italy retail operation reshapes pump network

February 20, 2014 | North Sea & Western Europe, Refining & Processing

Fuel pumps are seen at a Shell petrol station in London. REUTERS/Stefan Wermuth

Fuel pumps are seen at a Shell petrol station in London. REUTERS/Stefan Wermuth

Milan, Italy (Reuters) – Royal Dutch Shell has agreed to sell its Italian retail business to Kuwait Petroleum International (KPI) in a move that could shake up Italy’s inefficient petrol distribution network.

Italy has about 24,000 petrol stations dotted across the country, twice the number in France and almost three times the number in British.

Successive Italian governments have called for a reduction in the number of petrol stations and the introduction of more self-service pumps to make the sector more competitive but have met with stiff resistance from operators.

In a joint statement on Thursday, Shell said that the Q8 brand of KPI would replace that of Shell on the Italian network once the deal gained clearance from the competition watchdog sometime this year.

Shell last year said that it intended to sell some of its Italian downstream assets, including its retail, aviation and supply and distribution businesses.

No price indication was given for the deal with Kuwait, but a report in Italian daily MF on Thursday said the network could be worth up to 500 million euros ($687.67 million).

Kuwait Petroleum has about 2,700 petrol pump stations in Italy for a market share of around 11 percent. Shell, meanwhile, has 983 sales points.

Italy’s top petrol retailer is oil and gas major Eni , which has 4,698 sales points, according to data from Italian petrol association Unione Petrolifera.

“This deal is an important step forward for Q8 in strengthening its competitive position on the Italian market,” said Alessandro Gilotti, CEO of Kuwait Petroleum Italia.

Falling demand because of continuing economic weakness has led many car-mad Italians to leave their vehicles at home, squeezing margins for many petrol retailers and prompting calls for consolidation.

Shell, which in 2012 withdrew from a project to build a liquefied natural gas (LNG) plant in Sicily, said that Italy remained an important country for its oil and gas exploration activity.

“The sale is consistent with Shell’s strategy to concentrate Shell’s downstream footprint on a smaller number of assets and markets where we can be most competitive,” the company said.