BP Australia head Andy Holmes says a joint venture the oil major has formed in China will use expertise from the group’s Australian fuels retailing business to provide a new high-quality offering to motorists in three provinces in what will be a major expansion of the brand.

The venture announced last week with Shandong Dongming PEtrochemical Group, the biggest independent refiner in China, is targeting a network of 500 sites within 10 years, including new sites and acquisitions.

It will cover the fast-growing provinces of Shandong, Henan and Hebei east of Beijing, which together have about 260 million inhabitants, and will be BP’s only sole-branded sites in China.  The UK based major already has 740 co-branded sites, with PetroChina in Guangdong province, and with Sinopec in Zhejiang.

Melbourne-based Mr Holmes, who is also the chief operating officer for BP’s Asia Pacific fuels business, said the venture is another example of the energy giant’s focus on expanding its downstream retail business, just as it is seeking to do in Australia with the disputed $1.8bn deal to buy Woolworths’ chain of petrol stations.

The Woolworths deal has been rejected by the Australian Competition and Consumer Commission, which has asserted it would drive up prices. BP is still in the process of taking legal advice on whether or how to challenge the decision, with Mr Holmes saying in December he was still confident the deal would go through.

“We’re still reviewing our litigation options and still talking pretty frequently with Woolworths because we are still very committed to our partnership,” Mr Holmes said on Monday, declining to give any timing on a decision.

Mr Holmes, who is also set to take responsibility for BP’s Indonesian fuel operations, said representatives from Dongming Petrochemical had visited BP’s Australian and New Zealand operations.

“That was pretty instrumental in convincing them to sign the deal,” he said. “They wanted to see how we run retail in New Zealand and Australia and they were impressed, and we also introduced them to a lot of partners we work with as well.”

The Chinese venture will be partly supported by BP staff in Melbourne, the group’s Asia-Pacific headquarters for fuels, while the general manager will also likely come from the Melbourne office, Mr Holmes said. BP will transfer capability and understanding of running retail sites and building brand management and loyalty schemes in the new operation, which will also have a more extensive convenience retailing offer than is typical in China.

At the same time, the information flow will not be one-way, Mr Holmes said, noting that the digital expectations of retail customers in China are ahead of Australia.

“We’re expecting to learn from China and bring back some of that learning to here,” he said. “It’s no coincidence that we’re the first to launch a phone payment app at fuel stations in Australia and in New Zealand. I think some of that is because we already operate in China so we learn there and I would expect that to continue to happen through this joint venture as well.”

Brand loyalty schemes in China, for example, are popular but use mobile phone applications rather than loyalty cards. A new loyalty offer in Guandgong launched about 18 months ago reached one million customers within two months, he said.

In Australia BP is seeking to use the Woolworths deal to bring together its quality fuels with Woolworths Reward program and a new range of fresh take-home food. It had offered to sell a significant number of petrol stations to price-aggressive independent retailers to try to win ACCC approval and argued that the deal wouldn’t substantially lessen competition.

Extracted from Australian Financial Review.