Istvan Kapitany (Shell)

Despite the government’s recent controversial policy decision to control the prices of non-subsidized fuel, Royal Dutch Shell, one of the world’s largest oil and gas companies, still sees Indonesia as its third-largest potential market in the world after China and India.

The first foreign company that entered Indonesia’s fuel retail sector in 2005 believes that the country, with its huge population of more than 260 million, an annual economic growth of 5 percent and surging middle class, will need all kinds of energy from fossil fuels to renewables.

Shell executive vice president of global fuel retail Istvan Kapitany recently made a four-day visit to Indonesia to demonstrate the company’s strong commitment to expanding its retail outlets locally. The Jakarta Post’s Vincent Lingga talked to Kapitany about his view on the future landscape of energy consumption and domestic retail prospects. Below are excerpts of the interview.

Question: Could you chart out the changes now developing in the landscape of energy?

Answer: There is now a huge change developing globally as the energy sector is in transition from fossil fuels to cleaner fossil energy as natural gas and renewables. It is not either fossil fuels or renewables, but both run together. In Shell, we call it “more and cleaner energy”. Shell, which has over 40,000 stations around the world, is in the forefront of developing more and cleaner energy as gas.

In fact we are now more a gas company rather than an oil company and have been setting up more LNG [liquefied natural gas] stations for trucks. We have also developed hydrogen with almost zero emissions and have been expanding charging stations for electric cars in the US [United States], China and Europe. We estimate that globally, electric cars will increase from 2 million now to 500 million in 2040 and fossil-fuel cars from 900 million to 1.5 billion.

How will these changes influence the concept of fuel retailing?

The future concept of gas stations calls for more spaces for a bigger variety of fuels, hence a larger area for a service station to meet customers’ needs. Fortunately, Shell has been developing a richer variety of fuels that can fulfill customer needs. In fact, we are now redesigning our service stations around the world, including Indonesia, to provide more convenience for customers so that motorists can get not only fuel, but also coffee, groceries and other necessities.

Shell is focusing on convenient retail experiences. Motorists going to gas stations now want more than fuel. We want to generate 50 percent of the revenue of our service stations from non-fuel retail by 2025.

Today’s consumers are looking for efficient, enjoyable retail experiences that give them back time to do the things they enjoy. For consumers, convenience has become intrinsically linked to how they are able to enjoy the rest of their day. With modern lifestyles busier and more compressed, time is more precious and valued than ever, customers are willing to put a price on a shopping experience that integrates more seamlessly into their day-to-day needs.

How do you see Shell’s future role in Indonesia’s fuel retail?

We still play a very small part in Indonesia with only 85 stations [compared to 5,760 of state-owned oil and gas company Pertamina]. We have about 1,000 stations each in Malaysia and the Philippines, 600 in Thailand and 100 in India. But, in the future, we consider the country the third-largest potential market in the world after China and India. Certainly, I cannot specifically mention a particular number for Indonesia within the next five to 10 years and how will be the changes in the fuel consumption, but we want to play a very significant role.

Our advantage is that we can leverage our experiences of globally serving 30 million customers daily and custom-tailoring them to the needs of our customers in Indonesia. We always start with what the customers need.

Even though we still lose money in our fuel retail here, the market acceptance of the Shell brand is very encouraging as 60 percent of our customers have become Shell [ClubSmart] loyalty card holders. Yet, a more confidence-building trend is that quite a number of our customers are motorbike owners and almost 30 percent of our sales consist of V-Power, our highest-value fuel that charges a premium price.

Therefore, different from many of the other 75 countries where most of our retail chains are owned by dealers under license agreements, in Indonesia we own most of the gas stations already in operation. This means we invest a lot in our stations and transfer expertise through training to ensure that the service standard is the same in all outlets. But, as the market trust in our brand becomes increasingly strong, we are confident more companies will be attracted to become our dealers with the same standard service.

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