European oil giant Royal Dutch Shell plc (RDS.A - Free Report) recently opened its first service station in Mexico. With this latest move the company sets foot in the Mexican retail fuel market. This is a milestone event for Shell since Mexico is the second-largest economy in Latin America and its gasoline market is the fifth-largest in the world. The development is likely to offer the company multiple growth opportunities and boost its revenues.
The company’s first gas station includes a convenience store and is located in the northwestern suburb of Mexico City. With this development, motorists in the country will now be able to avail Shell’s high-grade gasoline and diesel fuels. The convenience store which is likely to offer freshly-brewed gourmet coffee, healthy fresh food and free Wi-Fi also promises superior retail experience to customers.
Shell is touted as the largest fuel retailer in the world with over 43,000 gas stations in around 80 countries worldwide. The company will also be expanding its network of service stations in other developing economies like India, Brazil, China and Indonesia over the next decade. In Mexico, Shell intends to invest around $1 billion over the next 10 years as part of its retail expansion plans.
Energy reforms have poised Mexico as one of the most attractive prospects for investment. In 2014, Mexican Congress passed landmark energy reforms to overhaul the country’s entrenched energy industry. The amendments opened private investment in the country by foreign investors, ending the monopoly of the country’s state owned behemoths Pemex and the power utility Comisión Federal de Electricidad. In March 2017, BP PLC (BP - Free Report) opened its first retail fuels site in the country and plans to increase investment in the industry over the next five years. In May, Exxon Mobil Corporation (XOM - Free Report) also announced plans to invest around $300 million in fuels logistics, product inventories, and marketing in the country for the next 10 years. Last month, Chevron Corporation (CVX - Free Report) also entered into agreements to launch its fuel service stations in the country.
Headquartered in Netherlands, Shell is one of the largest integrated energy companies and is engaged in production, refining, distribution and marketing of oil and natural gas. The company currently carries a Zacks Rank #4(Sell). Shell’s revenues, earnings and cash flow have been significantly hurt by the 3-year commodity bear market, while attacks on its local establishments by the Nigerian militants have added to the woes.
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