South Island fuel retailer NPD steps into North Island

Thursday, 28 May 2020

South Island fuel retailer NPD is planning to enter the North Island market, vowing to lower petrol prices through increased competition.

The company, which has about 70 sites in the South Island, is planning to open in self-serve stations in Porirua and New Plymouth before Christmas.

It has also committed to four other sites: in Hamilton, Palmerston North and two in Auckland.

Chief executive Barry Sheridan said he had been monitoring North Island price for months and it seemed that prices were much higher than they should be, and higher than the South Island.

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“Even with the Auckland regional fuel tax removed, the price of unleaded 91 last week was on average approximately 15c a litre cheaper in Christchurch than Auckland,'' he said.

''On other recent occasions, the differential has been as high as 30c a litre. In Porirua last week, average prices were approximately 32c a litre more than Christchurch.”

NPD is also rolling out 16 more stations in the South Island, but with the company's southern network nearly complete, Sheridan says moving towards a national company seemed logical.

Already on Thursday, he said fuel prices had fallen, on average by 10c a litre throughout the North Island, and as much as 29c a litre at one Auckland site.

Similar price falls had occurred ahead of NPD opening up in other locations, Sheridan said.

''We always believed there would be some strong competitor reaction to it. Typically, the South Island cost prices of fuel is actually higher than the North, due to the fuel distribution costs, getting it into the South Island, plus the scale of economies.''

Only a quarter of the fuel went to the South and 75 per cent to the North.

''So typically the South Island should actually have higher pump prices than the North, and it hasn't had for some months now.''

Sheridan said NPD would be able to reduce its capital costs by using self-serve sites, although there would be latitude to make them full service later.

NPD's move follows a Commerce Commission inquiry into the fuel market, which prompted legislative changes around wholesale fuel access and price transparency.

Sheridan said the upcoming regulations would potentially have some benefits, although NPD had a strong relationship with its wholesale supplier, Mobil.

At the retail level, however, he said it was entirely possible NPD and Mobil would be competing with each other in some places.

AA market watchdog Mark Stockdale said NPD was one of three ''no frills'' companies that had been shaking fuel prices up in the last year or two.

Waitomo and Gull, both North Island-based, had moved into the South Island, which had been good for the market there, and NPD had also become more competitive.

''Now we would say NPD is leading lower fuel prices in the South Island. Through March and April, the lowest fuel prices in the country were in Christchurch and Canterbury and they were all NPD service stations.

''At one point those prices got below $1.50 a litre for 91 Octane.''

A lack of wholesale competition was one of the problems that the Government's upcoming regulations had set out to fix, ''so it will be very interesting to see what impact the regulations actually have''.

As to locations, Stockdale said NPD and other upstart rivals were more likely to try and cut the lunch of the bigger brands, which have higher overheads, than compete with each other.

''We expect they will go to the suburbs where there aren't any no-frill brands operating.''

Family-owned, NPD began in the 1960s as Nelson Petroleum Distributors as a contract carrier for Mobil fuels and Castrol lubricants.

In 1996, NPD became a wholesale distributor for Mobil, with 11 retail sites and two trucks. It now employs more than 150 staff.