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Published on October 31, 2007

Even the briefest consideration of modern society will confirm that oil is an omnipresent commodity. From the fuel that drives just about every vehicle to the plastics from which most things seem to be built, oil - petroleum, that is - and its products are everywhere.

Therefore, you could be forgiven for thinking that marketing oil would be simplicity itself.

But spiralling crude-oil prices and global concerns over the environmental effects of fossil fuels have driven many oil giants to turn to new products and novel tactics to woo new customers - lest they, themselves, become fossilised.

The present surge of interest in alternative fuels, although motivated by the increasing price at petrol and diesel pumps, began in Thailand with His Majesty the King's far-sighted research projects as far back as 1985. It was then that the Royal Chitrlada Project began studying effective means of turning sugar cane into alcohol and blending it with petrol to make gasohol, an alternative fuel.

At the time, oil prices had begun their inexorable climb. But they later skyrocketed as a result of conflicts in the Persian Gulf and the awakening of the Chinese and Indian giants and their thirst for oil. Ethanol ceased to be an impractical joke, and the Thai government began its heavy promotion of E10, a blend of 90-per-cent petrol and 10-per-cent ethanol, more commonly known as gasohol.

But consumers were sceptical then - and many still are. Their commonly expressed concern is whether the ethanol will damage or destroy their cars' engines.

Working with advertising agency J Walter Thompson, Shell (Thailand) went about trying to figure out the mental block that was hindering a greater acceptance of the fuel. The agency, one of the first to embrace account planning, the discipline which brings the opinions of customers to the advertisement production process, carried out in-depth research. It found that people were not afraid of the change per se - at least, not when it could save them money. But they wanted to know who would be responsible if their cars were damaged or broke down.

Shell (Thailand) then launched a massive campaign to woo sceptics by guaranteeing that their cars would be fixed with all costs covered. The offer was a hit, and sales surged 70 per cent.

Shell now trails behind only PTT in gasohol sales.

"That's because we have only 550 petrol stations and PTT has 1,500," quips Shell Company of Thailand's fuels marketing manager Kematat Kraivixien.

Product development in the oil industry, particularly of fuels for light-duty vehicles like sedans and pickups, is inextricably linked to the automotive industry. Car manufacturers, along with governments, play an important role in spearheading changes in fuel consumption.

Diesel has generally been linked to old public buses and massive lorries churning out black smoke and giving the fuel a bad name, says Volvo Thailand's president Paul Stokes.

Car companies like Volvo are essential in the automobile food chain by producing engines that burn fuels more cleanly.

In Italy, Fiat was able to lift its market share to 31.9 per cent by focusing on small economical cars and taking advantage of government incentives like tax breaks for people trading their old cars for more fuel-efficient new models. In fact, Stokes says, about 80 per cent of cars in Italy run on diesel.

These days, new economic and environmental challenges have forced the oil and automotive industries to weather the changing business climate hand in hand.

But different countries have different fuel needs. In Thailand, the recent surge in popularity of pickup passenger vehicles like the Toyota Fortuner and the Isuzu Mu-7 has created a new demand for high-end diesel, prompting Shell (Thailand) to introduce its premium V-Power diesel this past August.

The fuel has garnered something of a legendary status. The company tested V-Power diesel in an Audi R10 TDI at the 24 Heures du Mans, the 24-hour endurance race in the French town of Le Mans. With bigwigs like Porsche having pulled out of the expensive event, Audi stole the limelight by winning in two consecutive years - first with an R8 and then with the R10. The latter victory was historic in that it marked the first time a diesel-powered vehicle had won the race.

Shell says its V-Power diesel creates fewer residues post-ignition, thereby reducing the risks of clogged fuel injectors. The company's senior technical adviser for Asia, Chaovalit Mahatumaratana, likens V-Power combustion to a full session of dental treatment, ridding the teeth of plaque and cavities, fluoride therapy and all. By comparison, he says, the best of other fuels simply brush the teeth.

The clean combustion is made possible by Shell's proprietary gas-to-liquid (GTL) technology.

To date, Royal Dutch Shell is the only company successfully exploiting this novel technology. With the successful initiation in 2004 of its giant Pearl GTL project in Qatar, aimed at producing 140,000 barrels per day of GTL products, Shell is now negotiating the establishment of another GTL joint venture in Nadym, West Siberia.

At present, GTL is something of a darling in the energy sector. For instance, a Chevron executive told World Gas Intelligence in June that the US oil giant was looking to "monetise" - convert into currency - its large Wheatstone natural-gas discovery off the West Coast of Australia by means of GTL technology.

Turning natural gas into liquid is not earth-shatteringly new - at least, theoretically. But at its US$850-million (Bt29 billion) Bintulu plant on the coast of the Malaysian state of Sarawak on Borneo 14 years ago, Shell was one of the first to patent a method for doing it. It has taken the Sarawak plant 10 years since its first GTL-product shipment in 1993 to turn a profit.

Surprisingly, Thailand is one of the few markets in the world with Shell's V-Power diesel, one of the prime products of its pioneering work in converting natural gas into a liquid fuel. And although the name does not buzz green like biodiesel, it's not hard to imagine the new GTL products playing a role, much like ethanol, in lifting Thailand from dependence on the foreign tankers and their belly-loads of crude oil.

However, margins in the oil business are getting smaller, as companies like Shell are squeezed between spiralling crude prices and the determination of governments and consumers to keep retail prices as low as possible.

Due to high costs, Shell's Kematat says there will be no increase in the number of petrol stations. The competition will now move to "field differentiation".

But with V-Power diesel and a Le Mans trophy in its wide portfolio, Shell (Thailand) is ready for the battle.

 Ki Nan Tsui

 The Nation