Private fuel retailers Reliance Industries Ltd and Essar Oil have joined the race for BP assets. RIL and Essar are interested in BP's retail outlets, terminals and aviation turbine fuel (ATF) facilities in at least four countries in Africa.
The move coincides with ONGC Videsh's plans to bid for a BP stake in a Vietnam oil field, along with PetroVietnam. BP wants to exit the field to partly make up for the $32 billion cost it has set aside for the Gulf of Mexico cleaning and compensation. A senior executive in a domestic oil company, though, said the sale of retail assets in Africa was not connected to the spill.
RIL and Essar are among a dozen companies, including PetroSA, who are evaluating the sale of BP retail assets in Africa. When asked, spokespersons of the two companies said they did not comment on speculation.
A PTI report said BP was selling retail outlets, terminals and aviation fuel stations in Botswana, Tanzania, Namibia, Malawi and "possibly" Zambia, to cover costs related to the worst oil spill in US history. The executive, however, said the global giant had been trying to slowly move out of petroleum retailing prior to the April blow-out that resulted in the spill.
BP controls as much as 70-80 per cent of the ATF market in some African countries. "BP, that roughly has around 20 per cent market share in these countries, had been trying to sell its retail assets in Africa prior to the spill. It is part of a trend among global companies to focus attention in the upstream oil and gas production business," he added.
BP has put on block roughly $30 billion of assets. Its chief executive, Tony Hayward, resigned earlier this week, with the company reporting a $17-billion second-quarter net loss.
RIL and Essar are both present in Africa, with RIL having a major storage facility in Kenya. RIL currently exports fuel to Gulf Africa Petroleum Corp (Gapco), a company it had acquired in 2007. Gapco has retail outlets in Uganda, Tanzania and Kenya. Essar Oil had last year acquired a 50 per cent stake in a four million-tonne a year Kenya Petroleum refinery in Mombasa.
Both RIL and Essar have refineries back home and with domestic markets being unfavourable, a foothold in Africa will help them in pushing petro products in the export market. "The margins in these countries is almost double that of the Indian market," said the executive.
Indian petroleum retailing is dominated by government-controlled companies that hold on to the price line, awaiting clearance from the government. Their revenue loss on sale of auto and cooking fuels was made up by the government through a subsidy that amounted to Rs 14,950 crore in 2009-10 and Rs 71,292 crore in 2008-09, when international crude price touched a record high of $147 a barrel. This subsidy is not available to the private sector.
