Husky bites into our dog-eat-dog gasoline market

Published On Sat, 12 Dec 2009

But fierce Ontario competition could mean purchase of 98 Suncor stations is more than retailer can chew

CALGARY–Husky Energy Inc. is entering a fiercely competitive market by buying 98 southern Ontario gas stations from Suncor Energy Inc., a petroleum industry consultant says.

"There can be some vicious price wars going on in the Golden Horseshoe," Roger McKnight of Oshawa-based En-Pro International said Friday.

"Husky wants to expand its presence in southern Ontario, which they think is a lucrative market, but I think they're going to be surprised."

Husky announced late Thursday it would buy the stations, which regulators required Suncor to sell as a condition for merging with Petro-Canada this summer.

Of the stations Husky is buying, 68 have Suncor's Sunoco banner and 30 have Petro-Canada's. Suncor was required to sell 104 stations in total, and is still working to find a buyer for the others.

Husky – which produces oil and natural gas in Western Canada, off the East Coast and abroad – has most of its retail operations concentrated in the West.

The purchase will more than quadruple its presence in Ontario, where it will have 128 locations.

"Population density is, I think, the most obvious reason," said Husky spokesman Graham White of the rationale for the deal.

"Having any business there, but certainly a retail gasoline marketing business, has obvious advantages."

Husky is used to competing head-to-head with other retailers in Western Canadian urban centres.

For now, Husky will buy gasoline to sell at its stations from Suncor, which has a refinery in Sarnia. However, Husky sees its new Ontario gas business meshing well with refineries it has in Toledo and Lima, Ohio, White said.

Husky expects to replace the Sunoco and Petro-Canada signs with its brand at the stations by spring of next year.

Other than that change, consumers probably won't notice much else, said McKnight.

"It will be merely a change in sign. There will be no change in strategy whatsoever," he said.

Neither Husky nor Suncor disclosed the price of their deal, but McKnight said he suspects Husky got a bargain because no one else seemed eager to take the stations off Suncor's hands.

"I would bet dollars to doughnuts they got a quite a good deal," McKnight said.

Calgary-based Suncor became Canada's largest energy company when it merged with Petro-Canada in August.

The core of its business is in Alberta's oilsands, but it also produces oil and gas off Canada's East Coast and overseas. It also has refineries in Alberta, Ontario and Quebec, and sells gasoline across the country under the Petro-Canada brand.

Husky shares closed up 92 cents, or 3.3. per cent, at $28.50 on the Toronto Stock Exchange. Suncor shares fell 51 cents, or 1.4 per cent, to close at $36.2

Source: http://www.thestar.com/business/article/737884--husky-bites-into-our-dog-eat-dog-gasoline-market?