A SURE sign of the growing market for fuel and gasoline can be found all around

Phnom Penh, where more and more cars and motorbikes are joining the bicycles and

cyclo traffic.

That point has not been lost on the multi-national oil

companies, who have arrived with market research, advertising slogans and fuel

quality studies in hand, and are currently spending about $80 million in

Cambodia to lay claim to another Asian market.

For the international oil

companies, the Cambodia market is still relatively small. Oil company officials

estimate the total market for fuels, gas and lubricants at about 500,000 tons a

year, or about $90 million in sales. But with new central power generators

coming on line in the next 12 months along with rapid growth in car and

motorbike sales, the market for fuel and gas is expected to grow at seven

percent or more a year.

In the past two years, more than 20 Shell

stations have opened, equipped with modern pumps and the red and yellow Shell

trademark. In the next three to four years the number of modern service stations

is projected to at least quadruple as three more foreign competitors - Total,

Caltex, and Petronas - get new retail distribution systems built.

"It's

going to be exponential growth," says Paul Guymon, marketing and research

manager for International Management & Investment Consultants Ltd., which

has done research for the oil companies. "It has a lot of potential... Shell's

been here for a long time so they're well entrenched, but once these others get

going they have the potential to muscle into Shell's and Sokimex's market

share."

Sokimex is a private Cambodian company, which along with CKC ,

the government fuel company, now controls the bulk of the fuel sales. Sokimex

stations have also been opening around Phnom Penh.

The foreign oil

companies left Cambodia in the mid-70s when civil war made it impossible to do

business here. Shell, which had sold products here since the 1920s, was the

first to return in 1992. Shell's first project was to spend $5.5 million

rebuilding a depot in Sihanoukville that enabled it to ship in fuel by barge

from Singapore and bring the fuel up to Phnom Penh by truck. So far Shell has

spent about $20 million, with its new service station network and new jet fuel

storage tanks at Pochentong Airport where it has a contract to supply jet fuel

to Royal Air Cambodge.

Edgar Chua, general manager of Shell Co. of

Cambodia Ltd., says Shell's operations should be profitable in a few years. "We

expect to have a rough ride for the first three to four years of operations," he

says. "If we assume the economy will be growing by five to seven percent we can

assume oil demand will grow by at least the same level," he says.

Shell's main competition so far has been Sokimex, which he estimates has

more than 50 percent of the market, its share bolstered by sales to the

government.

That situation is about to change as Total Cambodge, the

French oil and gas company; Caltex Cambodia, Ltd., the American joint venture of

Chevron and Texaco; and Petronas, the Malaysian national oil company, are upping

the stakes with expansion plans for Cambodia roughly equivalent to

Shell's.

Total is coming into the market with a $20 million budget. The

centerpiece of the Total plan is a large fuel depot now under construction on

the banks of the Mekong River about 15 kilometers outside of Phnom Penh on the

road to Vietnam. "This road is very promising," says André Camp, general

director of Total Cambodge. The road is projected to eventually be the major

transportation route from Bangkok all the way through to Ho Chi Minh City, he

says.

Camp says the 10,000 cubic meter storage depot will enable Total to

supply even more fuel than it needs to about 30 service stations it will open

over the next three years. "The key is the depot," he says. "We aim to have a

significant market share, 20 to 30 percent. To be a significant supplier you

have to control one third of the market," he says.

Construction on the

depot has just begun. The site will include five storage tanks, a jetty on the

Mekong, a loading gantry for tankers, pipe and pumps with a modern service

station on the road. The depot will employ about 30 people.

He says most

of the new Total stations will be built on the outskirts of Phnom Penh, but some

will go up in other provinces as well. He says Total will have stations in

Kampot, Battambang, Takeo and Sihanoukville.

Chua, at Shell, says the new

depot in Phnom Penh will give Total an advantage at least for the near future.

"We'll have to live with that and try to get a competitive advantage elsewhere."

He says the government had pushed Shell to put its storage depot in

Sihanoukville for environmental reasons so Shell officials were somewhat

surprised when Total was given approval for a depot on the Mekong. Depth of the

Mekong however is a limiting factor of a river depot, he says. Total will only

be able to bring medium size oil barges up river.

But if river transport

has limits, so does trucking fuel up Route 4 from Sihanoukville. Earlier this

summer a Shell tanker was attacked and burned in an apparent Khmer Rouge attack.

Shell's drivers were seriously inured. Chua says Shell has further limited the

daytime hours its trucks are on the road and asked the government for better

security. "We told them Route 4 is a major lifeline to the Cambodian economy,"

he says. "We're asking our shareholders to pour money into Cambodia and our

truck is attacked. It's not a very comforting thought. We're not asking for a

100 percent guarantee, but we want to know they are serious, that they really

are doing something about it."

Caltex also has plans for a marine

terminal, but the location hasn't been decided yet, says Caltex general manager

John P.C. Raeside. Caltex is the newest entry into the market and the company

has no service stations open yet. The company plans to spend $20 million in the

next three years, on the terminal and a network of at least 20 to 30 stations.

"We're coming in just like the other players, but we're a wee bit behind," says

Raeside. "We left Cambodia in 1975 and now we're coming back. We hope that will

be an advantage," he says.

Raeside says Caltex was given a verbal

affirmation by the government that no more multinational oil companies will be

allowed in, at least for the time being. "The ministries and CDC seem to see

Caltex coming in as good balance. They seem happy to have this portfolio - an

American company along with a French company, a British company and the

Malaysians."

Petronas, the Malaysian company, now has two stations but

like the other companies has announced plans to open 17 or more service stations

in the next year. They will be Petronas' first retail stations outside Malaysia.

The company has more than 400 stations in Malaysia . It is also looking into the

packaging and sale of gas for cooking for a 20 to 30 percent market share."

Although Petronas doesn't have the multi-national marketing and

financial clout of its competitors, the industry doesn't discount it as a rival.

"I think Petronas will be very important because of the Malaysian connection.

The government has been very active in encouraging Malaysian investment in

Cambodia," says Guymon, the marketing consultant for IMIC.

The oil

officials agree that the competition will be heating up in the next year as they

take aim at a market now dominated by Sokimex. Sokimex officials couldn't be

reached for comment.

"The market is not very big. I think it is big

enough for three or four players. Who they are going to be, we'll see," says

Chua.

"Competition is good, but nobody wants too much competition," says

Raeside.

A casualty of the modernization will be the sidewalk gas

peddlers who since the 80s have sold their fuel to motorists out of old soda and

liquor bottles. But selling gasoline in glass bottles is hazardous and would

eventually be banned anyway, most people involved in the situation say. "These

old fashioned stations are doing a service, an interim service, to the country,"

says Raeside. "You can't just ban them overnight, but it's really unsafe."