Alliance Bets On Shell

Shell International and Russia’s Alliance group announced plans on Friday to establish a joint venture to operate more than 150 Shell-branded gas stations in Ukraine. As part of the deal Alliance’s existing stations will be upgraded and re-branded under the Shell name. Shell will have a 51% stake in the new joint venture and Alliance will control the remaining 49%. Shell agreed to move forward with the JV agreement following a successful trial in the Kyiv area last year were the company re-branded  six Alliance stations which saw retail volumes double over a six-month period. Vladimir Nesterenko: In our report on Galnaftogaz (GLNG: HOLD) from November of 2006, we said that Shell is likely to buy out Alliance’s retail business if trial stations it set up showed strong results. We believe the news is positive for Ukrainian fuel retail players, as we don’t think Shell will stop at 150 outlets and most likely it will develop the network through acquisitions. The news is particularly positive for Galnaftogaz, which we consider an attractive target for acquisition due to its large modern retail network and considerable storage capacity.