Determining the Viability of Putting Up a Petron Bulilit Service Station in

Maraouy, Lipa City, Batangas

A Feasibility Study

Presented to the Faculty of the College of Business and Accountancy

First Asia Institute of Technology and Humanities

In Partial Fulfillment of the Requirements for the Degree of

Bachelor of Science in Accountancy

By:

Christopher S. Aguilar

Janine P. Mendoza

Pamela Kris A. Padilla

Lester Fiel T. Panopio

December, 2011

CHAPTER I

INTRODUCTION

Petroleum has a colorful history filled with colorful people. It has been a

cyclical history full of booms and busts; all of them magnified by the huge scale

of the fortunes won and lost.

The origins of the petroleum industry in the world commerce can be

traced back when Edwin Drake drilled the first commercial oil well in Oil Creek,

Pennsylvania in 1859. Years after October 1972, the principal exporting

countries in the Middle East had been gaining wealth, power, and expertise from

the enormous royalties they had been collecting since the first half of the 1900s.

They formed the Organization of Petroleum Exporting Countries (OPEC) and

began formally consulting each other on oil prices and policies.  The national oil

companies of the major exporting countries have been growing more vertically

integrated, investing their profits from the upstream segment of exploration and

production in expanding into the downstream segment of refining, transportation,

and marketing. (http://www.irs.gov/businesses/article/)

In the Philippines, the growth and development of the petroleum industry

started in the 1930s when large companies ventured into the industry’s

downstream segment. Due to favourable market trends and with the passage of

Retail Trade Liberalization Act of 2000 that enabled the intensive penetration of

incumbents’ market share by 70 new players in the market, many small and

medium-sized entrepreneurs are becoming interested to be part of the said

industry and Petron Corporation used this opportunity as its advantage.

(http://www.mib.com.ph/Others/Petron.pdf)

Petron Corporation, having the largest number of retail outlets in the

country with over 1,300 stations and being the biggest local refiner with a

capacity to process 180,000 barrels of crude per day, has opened its low-cost

micro refilling stations to interested investors called Petron "Bulilit" Service

Stations under the Petron Bulilit Dealership Program that capitalizes on the

opportunity of providing fuel in areas with untapped volumes. Petron's new

concept station offers investors a low cost alternative to develop service station

outlets under a major brand. The proposed new stations will have only two to

three pumps and are smaller than heretofore Petron stations.  The new stations

would be put up in areas deemed by the company as "pioneer growth" locations

that may have relatively small demand at present but have a great potential for

growth. (http://www.petron.com/newsroom)

Since the Filipino government recognize the petroleum industry as vital to

the country's economic stability, the researchers opt to establish the feasibility of

a gasoline station under the aforementioned Petron Bulilit Dealership Program,

the Petron Corporation’s latest innovation in the industry’s downstream segment

that assists the interested investors in the site selection and preparation, dealer

training and project implementation.(http://www.fundinguniverse.com/company-

histories/Petron-Corporation-Company-History.html)

A. Statement of the Problem

This study will determine the feasibility of establishing Petron Bulilit

Service Station along J. P. Laurel Highway, Barangay Maraouy, Lipa City.

Likewise, this study will answer the following questions:

Management Aspect

1. What form of business organization will be adopted?

2. What are the initial manpower requirements?

3. What is the initial number of people required for operation?

Technical Aspect

1. What are the franchising procedures?

2. What is the capacity of the gasoline tanks?

3. Where is the nearest refilling station?

4. Where will be the undertaking situated?

5. What would be the lot plan and construction layout?

Marketing Aspect

1. Who is the target market of the undertaking?

2. What are the strategies to be employed to penetrate the target

market?

3. Will there be a market gap for the undertaking?

Financial Aspect

1. How much is the initial capital needed?

2. What would be the sources of the capital?

3. Are there any cash bond and working capital requirement?

4. Will the undertaking be profitable?

Socio – Economic Aspect

1. In what ways can the undertaking benefit the community?

2. In what ways can the undertaking help the government?

B. Objectives of the Study

This study aims:

Management Aspect

1. To identify the people involved in the operation

2. To know the initial number of people required for operation

Technical Aspect

1. To determine the necessary franchising procedures

2. To determine the capacity of the gasoline tanks

3. To ascertain the nearest refilling station

4. To know the location of the undertaking

5. To determine the lot plan and construction layout

Marketing Aspect

1. To identify the target market of the undertaking

2. To know the strategies to be used in penetrating the target market

3. To assess if there is any market gap for the undertaking

Financial Aspect

1. To determine the initial capital needed

2. To ascertain the sources of the capital

3. To verify if there are any cash bond and working capital requirement

4. To determine the profitability of the undertaking

Socio-Economic Aspect

1. To know the benefits of the product to the members of the community

2. To identify the ways in which the undertaking can help the

government.

C. Significance of the Study

Apart from contributing to the petroleum industry, the study is expected to

benefit the following:

Proprietors

The establishment of the gasoline station will open opportunities

for other proprietors' future and potentially feasible endeavors (e.g.

convenience stores) in the area.

Consumers

These include drivers of public utility vehicles such as jeepneys,

multicabs and tricycles as well as owners of private vehicles in Barangay

Maraouy, Lipa City. Putting up a 'bulilit' station in the area would provide

them convenience and attend to their everyday gasoline needs.

Community

The establishment of the gasoline station will provide job

opportunities especially to the residents in the vicinity.

Local Government

The local government of Barangay Maraouy, Lipa City will be able

to generate additional revenue through taxes.

Academe and other researchers

The study will provide the academe and other researchers

information about franchising, especially fuel stations, which may be

useful in their undertakings as this may serve as a reference and a

source of related literature.

D. Scope and Limitations

The study focuses on the establishment of Petron Bulilit Service Station

along J. P. Laurel Highway, Barangay Maraouy, Lipa City, Batangas. The

researchers shall represent the sole proprietor Violy Olan who wants to expand

her real state and farm business into the other field, the retail industry.

The study will be conducted to determine the feasibility of the

undertaking. The researchers will only give attention to the establishment of the

gasoline station, which will operate only as a distributor of Blaze, XCS Plus,

XTRA Unleaded, Regular Unleaded and Diesel Max. Expansion, although Petron

Bulilit Stations are designed as pre-fabricated models that can start with one to

three product pumps to easily expandable stations, is not within the scope of the

study. Also, the study will not cover the use of Petron Fleet Card and offering of

Petron by-products such as Ultron, Rev-X, and Gasul since these will be

dependent upon the discretion of the franchisee as stated in the franchise

agreement.

The study is limited to registered jeepney, tricycles and multicabs with

franchise in Lipa City and privately – owned vehicles (e.g. SUV, Sedan,etc). Bus

service operators and trucks will not be within the scope of the study.

CHAPTER II

REVIEW OF RELATED LITERATURE

The related literature contains the related readings and studies regarding

the petroleum industry and provides the researchers additional information and

knowledge in the subject under study. The conceptual literature deals with the

published articles while the research literature pertains to the unpublished

materials.

A. Industry Terms:

Petroleum (crude oil) is a thick, dark oil composed of a complex mixture

of organic chemicals, most of which are made up solely of hydrogen and

carbon (hydrocarbon). (Mayer, Richard J. Connections in Environmental

Science, 1st edition. Singapore: McGraw-Hill Book Co., 2001.)

Franchising is a form of marketing and distribution in which the

franchisor grants to an individual or company (the franchisee) the right to

run a business selling a product or providing a service under the

franchisor's business format and identified by the franchisor's trade mark

or brand. A modern franchise includes a format for the conduct of the

business, a management system for operating the business and a shared

trade identity.

Franchising can also be described as a pooling of resources and

capabilities; the franchisor contributes the initial capital investment, know-

how and experience; the franchisee contributes the supplementary capital

investment, motivated effort and operating experience in a variety of

markets. Franchising is a comprehensive business relationship, not just a

buyer-seller relationship. There is considerable interdependence between

the franchisor and the franchisee.

Petron Blaze is an ultra-high-performance unleaded gasoline with an

extremely high octane rating. With its high octane rating, it prevents

knocking and maximizes engine performance at all times. Petron Blaze

also contains a special blend of octane booster and multi-functional

additive that brings about superior combustion and performance. Petron

Blaze is a pure, highly-refined fuel that does not only promise excellent

performance during engine start-up but also provides sustained engine

power every time.

Petron XCS Plus with ValvemasterTM is a premium alternative to leaded

gasoline that has the unique combination of two superior additive

systems, XCS and Valvemaster TM. Only Petron XCS Plus offers

Valvemaster TM, the superior lead substitute that is adopted in many

international markets including the U.S.A., the U.K., New Zealand and

Australia.

Petron XTRA Unleaded is an environment-friendly, premium motor

gasoline that contains a high performance detergent additive which

provides excellent cleaning effect for optimum vehicle power. It also

contains a unique gas-saving additive that promotes more efficient

combustion and lower fuel consumption.

Petron Regular Unleaded is a motor fuel with controlled volatility for

maximum economy, easy starting and good acceleration. It is suitable for

low compression gasoline engines.

Petron Diesel Max is a lowsulfur, premium product that contains a

unique and robust multifunctional additive that contains smoke reducing

agent and lubricity additive to protect fuel injection system. It also has the

ability to maintain and improve fuel injection system cleanliness through

unsurpassed detergency characteristics. (http://www.petron.com)

B. Conceptual Literature

Discovering Uses of Petroleum

According to Connections in Environmental Science (A Case

Study Approach, 2001 edition) by J. Richard Mayer, petroleum is a

relatively new addition to our energy stores. It was not until 1859 that the

world’s first successful oil was drilled at Titusville, Pennsylvania. At that

time, coal was the world’s most important energy resource, fueling the

steam engines that powered the Industrial Revolution. However,

petroleum quickly surpassed coal as the most highly valued energy

resource because one of its components, kerosene, could be burned in

street lamps and home lanterns instead of whale oil. At first, other

petroleum components, such as gasoline, diesel oil, and heating oil, were

discarded. However, their importance is soon discovered. Oil was

cheaper than coal, burned cleaner and was easier to transport. In the

early 1900s, Henry Ford’s automobile created a demand for gasoline,

further encouraging the emergence of petroleum exploration, drilling and

refining as new industries.

By 1929, oil supplied one-third of the total U.S. energy demand.

Ten years later, almost half of the nation’s energy needs were being met

by burning fuels derived from petroleum (petrofuels). By the end of the

World War II, coal was no longer a number one fuel; petroleum and

natural gas accounted for two-thirds of all U.S. energy requirements.

During World Wars I and II, the United States, Britain, and their

allies depended heavily on petroleum to fuel motorized transport vehicles,

merchant chips, naval vessels, aircraft, and military armaments. In 1940,

the United States and Russia were the world’s largest petroleum

producers and consumers, while the rest of the industrial world still

depended mainly on coal. But by the end of the second world war, the

productivity and economic prosperity of many nations, including the

United States, was linked to petroleum. In 1999, U.S. demand for

petroleum averaged close to 19 million barrels a day.

Republic Act No. 8762

Republic Act No. 8762, otherwise known as the Retail Trade

Liberalization Act of 2000 is the policy of the State to promote consumer

welfare in attracting, promoting and welcoming productive investment that will

bring down price for the Filipino consumer, create more jobs, promote

tourism, assist small manufacturers, stimulate economic growth and enable

Philippine goods and services to become globally competitive through the

liberalization of the retail trade sector.

Pursuant to this policy, the Philippine retail industry is hereby

liberalized to encourage Filipino and competitive retail trade sector in the

interest of empower the Filipino consumer through lower prices, higher

quality goods, better services and wider choices.

Republic Act No. 8479

Embodied in the Republic Act No. 8479, otherwise known as the

“Downstream Oil Industry Deregulation Act of 1998,” is the policy of the state

that deregulates the oil industry to “foster a truly competitive market which

can better achieve the social policy objectives of fair prices and adequate,

continuous supply of environmentally-clean and high quality petroleum

products” (Congress 1998).

With deregulation, government allows market competition. That means

government does not interfere with the pricing, exportation, and importation

of oil products, even the establishment of retail outlets, storage depots,

ocean-receiving facilities, and refineries.

It has been a decade ago since lawmakers made a proposition that

deregulation would secure the Philippines from the vulnerability of oil price

shocks due to its heavily dependent on imported oil. But it is now

increasingly apparent that many are calling to scrap the law as six out of ten

Filipinos favor the repeal of RA 8479. (Somosierra 2008).

2009-2030 Philippine Energy Plan

As the country faces the realities of growing energy demand, tight

energy supply, limited foreign investments and critical power development

issues, the Department of Energy is set to release the Philippine Energy Plan

highlighting the plans and programs of the energy sector to fuel support for

the economic growth of the country for the period 2009-2030. Specifically, the

Plan will deal with the future of energy development which is very vital to the

country’s prosperity. The over-arching theme of PEP 2009-2030 is ensuring

the best energy choices for a better quality of life.

The plans and programs of PEP 2009-2030 are crafted to respond to the

challenges that are confronting the energy sector at present and usher the

change in the landscape of the country’s energy future. In simple terms, the

Plan will see to it that public policies on energy are at par with the changing

needs of the energy sector which will ensure energy security, pursue

effective implementation of energy sector reforms and implement social

mobilization and cross-sector monitoring.

(http://www.doe.gov.ph/PEP/default.htm)

a. Research Literature

The study entitled “Feasibility on the Establishment of a Fuel Station

in Asaba, Delta State” made by Nkemdirim, Jennifer may form the basis of an

important investment decision and covers various aspects of the business

concept development, start-up, production, marketing, finance, and business

management. The study also provides sector information, brief government

policies and procedures and international scenarios. The study also

highlights the key factors in making the project profitable. The key factors are

the location of the project where the daily turnover of motor vehicles is a

dependent variable and the other one is the selection of the proper

equipment for carrying out the successful operations of the project.

Another study conducted by Vignesh, Vinayakaperumal G. (2002)

entitled “Feasibility Study to Set Up Company-Owned/Company-Operated

(COCO) Gas Stations in Metro Manila for Caltex Philippines, Inc.” deals in

depth the union related issues, the political sensitiveness associated in

operating a COCO, loss of existing dealer motivation due to COCO, risk

profile, and implementation plans. The study is primarily concerned with the

effect of the retail trade liberalization act that gives way to many aspiring

Filipino investors to establish their company-owned or company-operated

operations. The feasibility of establishing COCO's highlights the competitive

positioning strategy based on service differentiation. The strategy revolves

around Excellent Service Execution by the service attendants at the point of

sale.

Taking into account the importance of a gas refilling station in the

province of Batangas, the conclusion of the study conducted by Delos Reyes,

Leonor B.et. al., (1991) entitled “Profile of Caltex Refinery in San Pascual,

Batangas” (an exploratory study), is that the Caltex refinery plays a vital role

in the economic development of Batangas since the oil is the lifeblood of the

community. The researchers recommended that the Caltex refinery should

maintain the exemplary performance and the Batangas refinery should

expand in order to meet the increasing demand of the province.

Moreover, according to the researchers of the study entitled

“Business Profile and Status of Selected Gasoline Stations in Batangas

Province” made by Catibog, Lovely M., et. al., (2006), majority of the gasoline

stations in Batangas are owned by sole proprietors, operating a service type

of business for five years with an initial investment that ranges from P1, 000,

000 to P 3, 000, 000. The researchers recommended that in order to have

efficient and effective operations, the owners and managers need to maintain

their flexibility and management skills and to keep track of their

responsibilities.

CHAPTER III

MARKETING STUDY

Research Methodology

This part constitutes the blueprint for the collection, measurement and

analysis of data that will aid the researcher in accumulating information relevant

to the study. The researchers will use the Descriptive Method which involves the

description, recording, analysis and interpretation of the subject matter. This

method is primarily concerned with what, where, when, how much, or how a

research will be conducted.

The descriptive method involves the following:

1. Research Design

It refers to the arrangement of conditions and analysis of data in

manner that aims to combine relevance to the research purpose with

economy in procedures.

The subject of the study was limited only to the registered drivers,

with franchise of the route or Toda of public utility vehicles and those

which have privately-owned vehicles, who, usually go past Gen. Luna St.,

Brgy. 10, Lipa City.

With respect to the jeepney drivers and tricycle operators,

stratified sampling technique is employed in selecting the sample. This

method of sampling involves the division of a population into smaller

groups known as strata. The strata are formed based on members'

shared attributes or characteristics. A random sample from each stratum

is taken in a number proportional to the stratum's size when compared to

the population. These subsets of the strata are then pooled to form a

random sample.The sample calculated will be the researcher’s target

respondents to whom the questionnaires will likewise be distributed.

For the drivers of privately-owned vehicles the questionnaires will

be distributed randomly to the households residing within the vicinity. The

respondent will be selected on a per driver basis notwithstanding the

number of vehicles owned from the nearby barangays of Sabang and

Latag, Lipa City, Batangas.

2. Data Gathering

This is a term used to describe a process of preparing and

collecting data. The purpose is to obtain information to make market and

financial projections and quantitative and qualitative data analysis.

The researchers used the following primary technique in order to

obtain information through direct interactions from persons who can

provide the information:

Survey Stratified?

It refers to sampling or partial collection, of facts, figures or

opinions taken and used to approximate or indicate what a complete

collection and analysis might reveal. The researchers made a

questionnaire that embodies questions asked in a standardized manner

to each respondent. The questions raised vary according to the

classification of the respondents, namely, the tricycle drivers, jeepney

drivers and privately – owned vehicles.

The total number of respondents in each of the three category

(tricycle drivers, jeepney operators and privately – owned vehicles) will be

calculated using Slovin’s formula. This formula is used to take into

account confidence levels and margins of error. This technique is

employed by the researcher to have the desired degree of accuracy.

Moreover, it gives the researchers an idea of how large the sample size

in order to ensure a reasonable accuracy of results.

Interview

This refers to formal or informal meeting between two people or

among a group of people for the purpose of obtaining information about

something in particular. The questionnaire is structured in a way that

facilitates the gathering of specific information about the technical and

financial aspects of the study that will be deemed essential in the course

of the study.