Tesco Ireland signalled its determination to break into the Republic's lucrative petrol market yesterday when it opened its first forecourt station and immediately undercut local rivals, prompting at least two to lower prices within hours.

The group hopes competitive pricing - it is charging 84 cents per litre for unleaded petrol and 76.6 cent for diesel - will woo motorists and build a sustainable customer base at the expense of established players.

Statoil and Shell reacted swiftly, cutting unleaded prices at two nearby outlets by around 3 per cent to bring them into line with Tesco.

The chain was careful, however, to play down the long-term significance of its foray into forecourt retailing.

Corporate affairs director Mr Dermot Breen insisted the new service station, situated at the group's Killarney Park store in Co Kerry, represented an exploratory "toe in the water".

Though three other stations - two in Dublin and one in Meath - are mooted, Tesco is aware that Irish consumers have little experience of supermarkets venturing beyond their core grocery niche and is wary of over-reaching.

Keen pricing may not be sufficient to challenge the oil industry's dominance, commentators cautioned.

Irish motorists are not cost sensitive, typically buying petrol in €10 or €20 increments without establishing the per-litre cost, said Mr Dermott Jewell, chief executive of the Consumer's Association.

Petrol is a profitable income stream for Tesco UK, which operates 300 filling stations.

But ambitions to establish an equally comprehensive network in the Republic may be stifled because most outlets here are usually in multi-unit shopping centres where the potential for new developments is limited.