Memorandum by BP to Treasury Committee
as part of its inquiry into the Pre-Budget Report
ULTRA-LOW SULPHUR PETROL
1. BP is the United Kingdom's second largest
retailer of petrol and lubricants in the United Kingdom. Our market
share is some 18 per cent, and there are around 1,528 BP branded
sites within the United Kingdom. Some 800 of these are company
owned. We have two main refineriesGrangemouth in Scotland
and Coryton in Essexand thirteen terminals.
2. BP started selling ULSP as "BP Cleaner
Unleaded" at 18 sites in and around Edinburgh during February
of this year (2000). Our refinery in ScotlandGrangemouthwas
where the fuel was manufactured.
3. In April 2000, BP commenced the roll-out
of Cleaner Unleaded into London, at all 164 BP sites within the
M25 area. This roll-out was completed in June. Our refinery at
Coryton supplied our London sites, which means that both our UK
refineries are now manufacturing ULSP.
4. Cleaner Unleaded has replaced the regular
Unleaded 95it has not been introduced as an additional
small volume grade, so many motorists may not realise that they
are already receiving ULSP. It is dispensed through the same pumps
which were used for regular Unleaded 95.
5. So far as the rest of the UK is concerned,
BP planned last June to extend coverage from 1 October onwards.
During October, we distributed ULSP more widely from the terminals
already able to supply the fuel and added this capability to further
terminals. We now have 775 (out of 1,525) sites in the BP network
receiving ULSP. This accounts for about 60 per cent of BP's unleaded
95 volume, and is equivalent to about 2.3 billion litres per year.
Current indications are that the remainder of our network will
supply ULSP by April 2000, but from now on we are heavily reliant
upon third parties. In the locations still to be covered, we share
facilities with competitors, and cannot convert until they also
convert. Ultra-low sulphur diesel is available at all our sites.
6. The additional manufacturing costs of
ULSP have been absorbed, and the introduction of the fuel has
not affected our pricing policy. For example, when the duty break
of 1 pence per litre (ppl) was introduced on 2 October, prices
at ULSP sites were reduced by 1 ppl simultaneously. We estimate
that our incremental manufacturing costs of ULSP are between 0.05
ppl and 0.25 ppl, depending upon whether the refinery is Grangemouth
or Coryton. We have committed to reduce the prices on ULSP by
2 ppl when the further reduction in ULSP duty takes effect.