When I heard Shell is looking at selling its service stations in NZ and its shares in Fulton Hogan, my initial thought was that the Government should look at buying – to keep profits in NZ, to help ensure competition in the market as Kiwibank has for banking, and so there is a publicly-owned network of service stations that can used to lead the way on future ‘refueling’ (battery charging or battery replacement).
And while I still think there may be some merit in that, then I heard One New’s Heather du Plessis-Allan repeat Shell’s explanation for why it was looking to sell. The company claimed it needs cash for investment in exploration and high growth markets. That raised alarm bells for me and if we had enough quality journos they might have picked up the problem too.
Shell is awash with cash. It made a profit of US$41 billion last year, probably twenty times what it would hope to make from selling its NZ interests. It returned $3 billion in dividends each quarter to its investors last year and spent $3 billion on share buy-backs (basically, what a company does when it has nothing else to do with its money). And it’s still sitting on a huge pile of cash. It doesn’t need to free up money from NZ for investment elsewhere, if it needed the cash it already has it.
So that leaves two possibilities two my mind. Either Shell thinks that service stations aren’t a money-maker in the long-term and wants to get out while the getting it good. Or it thinks New Zealand isn’t a good prospect in the long-term. The first implies a belief that people aren’t going to be going to service stations in the reasonably near future either because the technology has moved on or the supply of petrol is falling. The second, more worryingly, suggests it doesn’t think the New Zealand economy will be a good place to be compared to the rest of the world for some time, which may also link into peak oil.
Maybe those aren’t the real reasons but would be really interesting to know why Shell wants out of New Zealand. A pity the question wasn’t asked.