In early 2010, Ferreira de Oliveira, CEO of Galp, reflected on the successful integration of Galp Spain with the operations of Agip and Esso, acquired in December 2007 and April 2008, respectively. This operation had allowed Galp to become a relevant player in the Spanish oil market, particularly in the retail and wholesale (non-network) sectors, reaching market shares of 7% and 15%, respectively, which positioned the company as the third-largest player in the Spanish (and Iberian) market.
Additionally, the company had successfully overcome the complex management challenge of integrating three companies simultaneously through a careful process that allowed for the creation of a new organization, incorporating the best practices of each company. During 2010, the new organization would begin its first year of joint operation, with high expectations placed on the new company’s ability to achieve the expected qualitative leap in Galp’s positioning in Spain, enabling it to compete on an equal footing with the leading companies in the Spanish market.
The Spanish fuel market
In the 1980s, the Spanish oil market was heavily concentrated among three major companies that dominated the market: Repsol YPF, Cepsa, and the British company BP. In the early 1990s, the Spanish government decided to follow international trends in oil market deregulation, opening the door to new national and international players. However, this liberalization experience ended up being compromised, as the significant market power of the incumbent companies managed to prevent new players from reaching the critical mass necessary to become competitive, leading the vast majority to eventually leave the market.
Although there were more operators in Spain in 2007 than in the 1980s, the market remained heavily dominated by large companies, with Repsol maintaining its position as the undisputed leader, with a retail market share of 42% and a network of 3,500 service stations. Cepsa held the second-largest market share (18%), with a network of 1,500 service stations. In third place was BP, with a network of 640 service stations and a market share of 9%. The fuel distribution business in the Iberian Peninsula was characterized by low margins and low expected growth. In the retail segment, competitors set prices on an almost daily basis (two to three times a week), varying according to the laws of supply and demand in local geographies.
Particularly from the year 2000 onwards, Galp, supported by its logistical base in Portugal and taking advantage of the high level of integration of the Iberian oil markets, was the only operator that managed to maintain growth. It carried out a policy of continuous acquisition and the opening of new Galp-branded stations, gradually entering the aviation and LPG sectors. DISA, being an operator with a good competitive position in the Canary Islands, managed to acquire Shell’s assets, thus gaining a relevant status on the mainland and positioning itself as a player with a market share of approximately 4%.
In 2006, the Spanish market was predominantly an importer of petroleum products, mainly diesel and fuel oil, from countries such as Italy, the USA, countries of the former Soviet Union, and the UK. The exception was gasoline, where Spain was a net exporter, with sales to non-OECD European countries, the USA, Mexico, and Canada.
For 20 years, practically until 2005, the Spanish market showed one of the highest growth rates in Europe, maintaining more modest growth thereafter due to the increasing maturity of the Spanish economy. In European terms, Spain had one of the largest refining markets in 2006, with a 9% market share in the region, possessing nine large refineries and one specialty refinery.
In 2007, the Spanish oil product distribution pipeline network was based on a 3,546 km network operated by CLH1, transporting products from coastal refineries to major consumption areas in the interior of the country, extending from Bilbao in the North to Cádiz in the South Atlantic, also connecting the Western Mediterranean refineries (Tarragona) to the Central Zone.
The fuel retail business was essentially based on the network of service stations and the operational support logistics network. In the Spanish case, it underwent significant evolution with the deregulation process initiated in the 1990s, a fact that led to an increase in the number of service stations from fewer than 5,500 in 1992 to more than 9,000 in 2007, including approximately 500 stations outside mainland Spain.
