The company will spend around $100 million, less than half the amount expected by some analysts, to purchase the rights to operate Shell sites from Shell multi-site franchisees.

Customers would be offered a fuel discount when they made purchases of more than a certain amount at Coles, Bi-Lo and Liquorland stores.

The alliance, when fully rolled out, will see a Coles Myer subsidiary become the operator of Shell's core network of 584 service stations across Australia. The alliance is planned to begin in July at more than 150 sites in Victoria with Coles Myer to set pump prices as well as offer CML customers fuel discounts.

It is expected that around 80% of CML stores will be within 4km of alliance stations,

If successful the program will become national by mid-2004 with Shell supplying fuel products and service station properties while the sites will be branded both Coles Express and Shell.

The company said the alliance would contribute in excess of $3 billion in additional annual sales to Coles Myer when fully rolled out.