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Road to recovery
Published:  02 May, 2008

The hot topic in the pumps sector this year looks set to be Stage II Vapour Recovery(VR) - and the deadline is approaching fast.

In just over 18 months any retailer selling more than 3.5m litres of petrol a year will need to comply with the new legislation, with an estimated one fifth of existing UK sites affected. Most new-build sites will also have to comply because their limit is 500,000 litres per year.

Stage II VR aims to cut air pollution by reducing emissions of harmful volatile organic compounds which escape during refuelling with petrol. It works by capturing the fumes and returning them to the underground storage tank. The government deadline for compliance is January 1, 2010, which may still seem a fair way in the future, but companies which provide the equipment are warning retailers to act sooner rather than later - or risk having to close sites.

Paul de la Port, Dresser Wayne's managing director, UK & Ireland, says: "Like many countries before it, the UK has new strict legislation to implement Stage II VR in a short time. Retailers may face a serious lack of companies capable and available to do upgrades - and failing to get compliant could mean shutting down sites.

"We see that environmental factors will have a major influence on driving legislation geared towards renewable sources of fuel, vapour recovery and reducing overall carbon footprints." He adds that the strict Stage II VR legislation together with a much greater emphasis on green fuels "will have a major impact on the retailers in this market over the next two to three years".

Tom Ellicock, director of EPOS Engineers - a division of Indigo Retail - says: "The critical decision is how to upgrade efficiently and cost-effectively. Retailers are balancing the cost of refurbished versus new pumps and the effect the installation options will have on the running of the forecourt."

According to Ellicock, there are three main options:

1. Close down the site and refurbish the pumps. Ellicock says that some major oil companies are upgrading to Stage II in this way, but an independent retailer would want to avoid losing sales.

2. Send pumps back to the manufacturer, two at a time, to be refurbished and re-installed. The benefit of this over option one is that the site can still trade through the upgrade process, although with fewer pumps. Ellicock says the cost to upgrade differs per pump but a six-hose pump costs in the region of £5,000 to £6,000. There is also the transportation cost of about £700 per two pumps to consider, as well as the loss of business revenue due to the reduced number of nozzles available.

3. Install new pumps with VR. Ellicock says: "A six-hose pump will cost the retailer £10,000 to £11,000, and some of this may be offset by the sale of the old pumps to a company which will refurbish and sell on to smaller sites that don't need to comply with Stage II VR. New pumps can be installed while the site is still trading, minimising the loss of business during the upgrade process."

EPOS Engineers sells refurbished pumps to major names such as Murco on a regular basis, but generally recommends retailers upgrade to new pumps.

Ellicock explains: "Although the initial cost is higher, the equipment will be covered under warranty and will last around 15 years, rather than the five years usage expectancy from the refurbished pumps.

"A pump replacement project can be conducted by EPOS Engineers within five days, with the site only being closed for a matter of hours. The industry expects to be very busy with Stage II in 2009, and EPOS Engineers recommends that retailers who want to ensure they are upgraded in time start planning their projects now.

"However, the market for refurbished pumps remains buoyant. The relative cost of the upgrade on the forecourt is worthwhile if retailers can increase the number of fuelling stations and therefore throughput."

Tokheim's VR system is the ECVR-SCS. Mark Husband, sales and marketing co-ordinator at Tokheim UK, says: "Our system calibrates itself - there are no moving parts. The ECVR-SCS system should only require being checked every three years by an engineer, as opposed to weekly and annual checks for competitors' open loop systems.

"If a system is not self-calibrating it has to be checked every week, and that takes approximately 45 minutes of an employee's time. This is a visual check to make sure the VR equipment is working. The retailer needs to cordon off the dispenser, which means closing down one of their islands. If a retailer is doing this once a week, we estimate this costs them £1,430 a year.

"We've taken our estimations from the DEFRA guide, meaning there is a total cost of £5,730 to a retailer who doesn't have a self-calibrating system. Our system only needs to be checked once every three years at a cost of approximately £720."

The ECVR-SCS can be fitted retrospectively and, according to Husband, the price varies according to the individual site depending on pump type, pipework in place, site communications, electrical work, site and pump age.

On the product side, the Tokheim range goes from the Quantium 100T, which is its basic retail solution, to the 500T1 - its top-of-the-range forecourt dispenser. All Tokheim's dispensers are available with Stage II VR, while the 400 and 500T1 can also be fitted with Crypto VGA, the company's outdoor payment terminal.

Meanwhile, Torex has been testing its CleanAIR system for the past four years and it is now being used - the company says the system typically recovers just over one litre of fuel for every 1,000 litres sold, providing a "substantial return on investment" to the retailer.

Doug Hargrove, Torex VP UK and Ireland, says that even those retailers who don't need to comply with the Stage II Vapour Recovery criteria could benefit from getting the systems installed.

He says: "The CleanAIR system works by turning the vapour into fuel and injecting it back into the system - it does not return it to the tank like other Stage II VR systems. We recommend that even those fuel retailers who are not required by law to fit Stage II VR should look at the environmental benefits that the equipment brings for customers. The air quality difference between a VR equipped petrol forecourt and a conventional pumping arrangement can be quite striking. With the latest equipment there is almost a complete absence of petrol smell and fumes." Hargrove adds that retailers interested in installing VR equipment should seek independent advice from the Petrol Retailers Association (PRA).

Martin McTague, managing director of Edensure, reckons the introduction of Stage II VR is making the control of wet stock more difficult now than in the past. He explains: "All petrol vapours which go back into underground tanks have to be accounted for and with increasing environmental scrutiny at forecourts there is a requirement to be able to document this vapour analysis. For forecourts which operate with Torex's CleanAIR system, which recovers petrol vapour at the dispensing point, they should also be tracking the stock gains but this will require more complex controls. My advice to forecourt managers is to call their wet-stock management supplier, and discuss their individual needs."

== MERCHAnDISING ==

Meanwhile, manufacturers are increasingly adding more high-tech features to their pumps in a bid to help retailers increase their profits. Dresser Wayne's de la Port says: "In today's competitive environment, service station owners need to aggressively market all their product lines. If they are to survive and prosper, they cannot just rely purely on margins from fuel sales. In addition, given the high price of fuel, wet-stock shrinkage is costing retailers more money. Dispensers that are fitted with drift-free metering technology are becoming increasingly important to retailers."

One of the most advanced pumps on the market must be Dresser Wayne's Global Ovation iX. Unveiled in February, this is a high-tech piece of equipment with many additional features, including an integrated multi-media display, sleek styling and innovative technology. But according to Dresser Wayne, it's not just multiple-site operators who can benefit from the advanced design - in fact, the first Global Ovation iX due be installed at a site in the north of England, is for a single-site operator.

Adds de la Port: "The Ovation is probably not intended for a single site operator with one pump that only sells fuel. But it's well within the reach of a single-site operator if they also run a typical c-store on site."

Gray Taylor, Dresser Wayne vice president of global marketing and business development, says the Global Ovation iX offers "unprecedented marketing capabilities" and a new way to get customers from the forecourt to the store.

He says: "Its full-colour, in-dispenser video display can be customised to promote in-store products according to market trends or even the time of day. Combined with a little creativity, the possibilities are tremendous."

The dispenser features the iX technology platform and has three iX modules which can be added to expand performance and manageability, including the iX Media multi-media promotional tool, iSense self diagnostics and remote management system, and an in-dispenser secure payment terminal which integrates country-specific and customer-defined payment schemes.

Another new product being launched in the UK this year comes from German company Scheidt & Bachmann. It claims its Clou MZ 7000 is the "smallest petrol station in the world". The Clou offers pay-at-pump facilities and entertainment on screen - including online news, traffic information and ads for services available at the site, such as car wash offers and special deals.

Frank Horak, head of product management at Scheidt & Bachmann, says: "We call it the smallest petrol station in the world because you don't need a shop with point of sale and back-office, you don't need an outdoor payment terminal, it's all included in the dispenser." Horak adds that the features have been tested in Austria and have been very successful - especially advertising kids' products in the shop. The Clou, which was on show at the International Forecourt and Fuel show (IFFE) in Birmingham this month. should be available to UK retailers by the second half of 2008 through Premier Group. The Hertfordshire-based distributor is also due to provide the service and back-up for the equipment. Scheidt & Bachmann also has a UK subsidiary located in Surrey, which will also provide support.

The pay-at-pump facility has also been gaining popularity in recent years. Frank Hare, general secretary of the Petroleum Equipment Installers and Maintenance Federation (PEIMF), says: "Retailers may want to get customers into the shop, but some customers just want to fill up and get out - they don't want to bother queuing up to pay.

"Getting pay-at-pump facilities fitted can be beneficial for the retailer because it keeps volume up and speeds up payment for people who only want petrol."

Manufacturers, including Dresser Wayne and Gilbarco Veeder-Root, are increasingly offering pay-at-pump functions on their equipment.

Esso has been rolling out pay-at-pump at its company-owned sites. The oil company has about 600 company-owned sites in the UK, with some 2,500 pumps.

Nearly 100 of Esso's On The Run sites offer pay-at-pump, a feature which the company says has proved particularly popular with customers who don't want to leave young children in the car while they pay for their fuel, and those who only want to buy fuel.

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=== Case study: Henderson Retail ===

Henderson Retail is Northern Ireland's biggest independent fuel site operator with more than 40 forecourts affiliated with major oil brands.

The business, a division of Henderson Group, owns and operates Spar and Eurospar sites in Northern Ireland.

The company started installing outside payment terminals in 2006, with HTEC's HydraOPT terminal at its Spar Dundonald site in east Belfast. This is a Chip & PIN outdoor payment terminal which lets customers pay in a secure environment while speeding up transactions. Customers can also use the HTEC equipment to pay on the forecourt for car wash and jet wash facilities.

Henderson now has the outdoor payment terminal facilities at three of its sites.

Mark McCammond, retail operations director at Henderson, says: "We were keen to maximise convenience for busy motorists who simply wanted to get fuel fast. The vast majority of these customers were not buying anything from the shop and by removing them from the queues we have enhanced the shopping experience for food customers whom we can now serve faster. We have also served the busy motorist faster outside and attracted new fuel customers to the site. It's a win win situation."

The outside payment terminal at the Spar Dundonald site now accounts for 13% of fuel sales.

According to McCammond, the company is looking at installing pay at pump at some of its other sites.

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=== Case Study: Euro Garages ===

There is still plenty of demand for second hand or refurbished pumps - which are obviously a cheaper option than buying new pumps. Euro Garages has been working with EPOS Engineers to refurbish a number of its forecourts, including the recently completed project at its Shell-branded Service Station in Warwick.

Euro Garages needed to improve the fuel facilities at the site by upgrading its pumps to sell all fuel grades at each pump position. EPOS Engineers supplied and installed four refurbished eight-hose Gilbarco Euroline pumps along with new plastic suction lines and Stage II Vapour Recovery. The work took eight days and included 31 metres of trenchline, new electrics and new pipework.

The site closed for just two and a half days for EPOS Engineers to fit the pumps and split the suction lines to obtain Weights and Measures approval.

Euro Garages director Nasir Yusuf is really happy with the outcome, and says the benefits have outweighed the cost of the work. "The EPOS Engineers team worked proficiently on this project within the all-important deadlines. Its excellent installation has enabled us to increase revenue at the site which more than compensates for the project cost and temporary disruption to the business."