Rob Routs is Executive Director Downstream at RoyalDutch/Shell Group. This column has been excerpted from a speech he presented at the National Ethanol Conference held in Phoenix, Ariz., on February 8, 2005
Rob Routs is Executive Director Downstream at RoyalDutch/Shell Group. This column has been excerpted from a speech he presented at the National Ethanol Conference held in Phoenix, Ariz., on February 8, 2005
We are now entering a period of unprecedented innovation and experimentation in the provision of transport fuel. We are seeing an increasing range of fuel options including advanced gasoline and diesel; biofuels such as ethanol; and synthetic fuels including gas to liquids and biomass to liquids. Technology will play a key role in the further development of these fuels. Equally important will be the marketing of newer fuels and ensuring that the techniques used in the successful marketing of existing fuels are applied to future fuels. While no one can predict the precise make up of the future fuels mix, it is clear that there will be many new opportunities ahead for all fuel producers to provide clean, efficient and cost effective products to customers across the world.
And that makes it a really exciting time to be in the fuels business.
In the next 20 years or so we could see a whole range of new technologies, new fuel types and new vehicles. Those developments will give energy producers new business opportunities as they respond to growing customer demand for more advanced fuels. They will help industry meet society’s demands to mitigate the effect of those fuels on the environment and they will provide ways of addressing the political imperatives to reduce dependence on imports.
However, we do need to recognize that the scale of the challenge in meeting those demands will be huge. Around the world, demand for transport, especially road transport, is growing at a rapid rate. By 2020 there could be one billion cars on the world’s roads, 50% more than today, and those vehicles will need ever increasing quantities of secure and reliable supplies of clean and efficient fuels. That makes it especially important for all of us to embrace what can be called “sustainable mobility.”
But now I want to touch on two factors that can help us meet the challenges of operating in that increasingly complex and competitive market -- technology and marketing.
The Role of Technology
Let me start with technology. Technological development has always been important in our industry. And it is going to become even more so in the future. We must ensure we extract the value from technology throughout the energy chain - from production right through to the manufacture, transport and distribution process. At every step it can help improve the quality and efficiency of what we do. And it can help us meet the needs and expectations of our customers and of society as a whole. Another key benefit of technology is the way it opens up new ways of doing things. One example of this is the work Iogen are doing to commercialize cellulose ethanol.
We think Iogen’s cellulose ethanol, by using residue feedstocks and avoiding competition with agricultural production for food, offers very real environmental advantages. And, while there is more work to be done in this respect, it has the potential to be cost competitive with gasoline. We also think it presents a good business proposition - we wouldn’t be investing in it if we didn’t think so and we think its attractions will increasingly become clear to other investors too.
And the real progress Iogen has made in a very short time to make cellulose ethanol a practical option is a testament to the value that can be derived from new technology. Of course, cellulose ethanol is not the only option for the ethanol industry but it is one which can complement existing activity. And I think the message is clear, whatever part of the ethanol business you are in, there is a powerful need to improve the efficiency of what you do and that means investing in and supporting the new technology to help you do so.
However, getting the technology right is only one element in the success of a fuel. Once you have your product you then, of course, need to distribute it efficiently and this is certainly an area where the major oil producers have the benefit of experience and expertise -- expertise that they could apply to the distribution of alternative fuels in the future.
Effective Marketing
At the end of that distribution chain are the most important people of all -- the customers who we have to persuade to buy our products. And that’s where the marketing comes in. Effective marketing will become even more important as competition increases and customers are presented with ever greater choice.
Let me give you the example of a very recent successful marketing campaign. If that marketing campaign has worked you should be aware that Shell has launched V-Power fuel here in the U.S.. Shell VPower is the most advanced fuel Shell has ever developed. It is a new premium-grade gasoline with more than five times the minimum amount of cleaning agents required by government standards. And it actively cleans your engine as you drive by removing carbon deposits from critical engine parts.
We had already launched premium fuels in 50 countries but the U.S. was our biggest challenge and biggest market. Let me just give you an idea of the scale of the project. It involved 13,000 retail outlets, converting 65,000 fuel dispensers, training 12,500 staff and was supported by a $30 million communications campaign.
While the scale of the campaign was unusual the basics would apply to the marketing of any fuel -- using leaflets, advertising, creating excitement and enthusiasm, training the staff to ensure they knew the benefits of the fuel and that they passed on that knowledge to customers. And providing incentives to customers -- such as gift vouchers -- to demonstrate their own knowledge of our product. Indeed we have a few vouchers left and I was tempted to set you the V Power general knowledge quiz at the end of my speech. That certainly would have been a good test of whether the marketing campaign has worked.
The other test of the marketing campaign is whether it has delivered sales. And there we do have some very encouraging data. In the six months since its launch V-Power has become America’s best selling premium gasoline. I have given you this example of a successful marketing campaign, partly because it is the one I know best, but also because it involved the introduction of a new type of fuel in a sophisticated and competitive market. And think that we can apply many of the techniques we have learned from marketing today’s advanced fuels, from campaigns like that for V-Power, to the emerging alternative and renewable fuels market.
It is a very exciting time to be in the fuels business wherever you take part in that business -- renewables, hydrogen, conventional, or a combination of all three. The days are long gone when the fuels market was a static one where some people thought that the only way to add value was to sell more sandwiches! Fuels matter again and we, in the business, have the advantage that we have a good product, an adaptable product and a product that will continue to be in great demand. That means the opportunities are great, we just have to make sure that we are ready to seize them -- wherever they come from. So I look forward to continuing to exchange ideas with you, and working together to provide clean, efficient, and cost-effective fuels to customers across the world.
Source: GreenBiz.com
