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Chevron Doubling ExtraMile

SAN RAMON, Calif. — Chevron Corp. said that it is planning a major expansion of its ExtraMile gas station brand in the San Francisco Bay Area and along the West Coast, according to a report by The Contra Costa Times. “We are trying to grow a critical mass of these ExtraMile stations so they become a well-known retail offering,” Dale Walsh, president of Americas Products for Chevron, told the newspaper.

The company currently has 80 ExtraMile sites in the Bay Area and 502 overall in the country, said the report. Chevron, however, plans a much larger number in the coming few years–an expansion that could double the current number of them.

CSP Daily News first reported in December about Chevron’s plans to expand ExtraMile. (Click here for previous coverage.)

“We will end up in the 800- to 1,000-store range over the next three to four years,” Walsh told the Times this week. “It depends on the economic climate and other things.”

In 2011, Chevron intends to add 100 ExtraMile stores to existing gasoline sites, the report said.

“At least three-quarters of them will be in California,” Walsh added. The next ExtraMile stations that Chevron will launch in the Bay Area will be in Alameda, Brentwood, Castro Valley and Pleasanton.

Chevron aims to cluster the ExtraMile expansion in territories near its oil refineries, said the report. Much of the growth will occur in the Bay Area, where Chevron has a big refinery in Richmond, and Southern California, location of Chevron’s El Segundo refinery.

“We have a strong retail presence in the Bay Area, as well as manufacturing operations in both the Bay Area and Southern California,” Chevron spokesperson Sean Comey told the paper.

Chevron officials think the addition of ExtraMile stores will help existing stations survive in an already competitive arena that is burdened by skyrocketing fuel prices.

“A retail site, selling fuel alone, will have a hard time competing,” Walsh told the Times. “An additional profit center like a convenience store is an absolute necessity for the fuel business.”

The company and the independent owners who operate under the Chevron or ExtraMile brands will be able to attract a wider mix of customers by offering fuel adjacent to a c-store. “You have some customers who come in for gasoline only, some for convenience store items only, and some will buy both,” Walsh said.

The approximately 500 ExtraMile stores break down to about 270 owned and operated by Chevron and 230 franchise locations operated and owned by independent entrepreneurs, company officials told the paper.

Chevron expects that its expansion will significantly shift the mix of the ExtraMile stations. “We will soon have more franchise sites than company-owned sites,” Comey said.

By expanding its retail network, Chevron has embraced a strategy that runs counter to the approach of its major oil company rivals, said the report.

“The general trend has been for major oil companies to do the exact opposite,” Robbert Van Batenburg, head of research with Louis Capital Markets, told the paper. “They are selling the retail business.”

Chevron’s retail expansion comes on the heels of its wide-ranging job cuts in the downstream–or refinery and retail operations. Chevron sought to eliminate 2,000 downstream jobs in its restructuring of 2010. (Click here for previous coverage.)

And in late 2009, after a review of its U.S. portfolio, Chevron decided to withdraw its motor fuels operations in some areas of the eastern United States, including Delaware, Indiana, Kentucky, North Carolina, New Jersey, Maryland, Ohio, Pennsylvania, South Carolina, Virginia, West Virginia, Washington, D.C., and parts of Tennessee. Approximately 1,100 independently owned and operated retail stations were slated to be debranded. (Click here for previous coverage.)

“Their downstream business is still shrinking, deliberately,” Pavel Molchanov, an analyst with Raymond James & Associates, told the Times. “But it’s more than just a matter of sell, sell, sell. It’s a matter of selling some assets and tactically adding others in certain locations.”

The Golden State will be the key to Chevron’s ExtraMile strategy, the company said. “California is a key growth market, it is a core market,” Walsh said. “We have been doing business here for 130 years.”

San Ramon, Calif.-based Chevron is one of the world’s leading integrated energy companies, involved in every facet of the energy industry. It explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels.