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Mon 21 Oct 2019 12:51 PM

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More Indian oil companies said to attract international interest

The Narenedra Modi-led Indian cabinet has already given the go ahead to privatise state-owned Bharat Petroleum Corp (BPCL)

More Indian oil companies said to attract international interest

The Narenedra Modi-led Indian cabinet has already given the go ahead to privatise state-owned Bharat Petroleum Corp (BPCL) by divesting government’s 53.29 percent equity stake in the company.

India is expected to see entry of several international oil majors in the short-to-medium term, with more state-owned and private sector companies are said to be drawing up plans to divest stakes in their refinery & petrochemical and fuel retail businesses, industry analysts have said.

State-owned Oil and Natural Gas Corp (ONGC), India’s largest oil and gas producer, is said to be planning to divest its stake, partially or fully, in either Hindustan Petroleum Corp (HPCL) or Mangalore Refinery and Petrochemicals Ltd (MRPL) – both its subsidiaries.

The Narenedra Modi-led Indian cabinet has already given the go ahead to privatise state-owned Bharat Petroleum Corp (BPCL) by divesting government’s 53.29 percent equity stake in the company.

Oil sector analysts told Arabian Business they believe Reliance Industries Ltd could also be looking at diluting more stake in the group’s refinery and petrochemical business in the short-to-medium term, as the company looks to focus more on its retail and telecom businesses going forward.

The Mukesh Ambani-led RIL has recently announced a deal in principle with Saudi Aramco to sell 20 percent stake in the group’s refinery and petrochemical business.

Adani Gas, which is a developer of gas import terminals and retail chain for gas, has also recently announced a deal with Total to sell 37.4 percent stake in the company to the French energy major.

“More international oil companies – the likes of Saudi Aramco, Total, ExxonMobil and Shell – could be looking for investment opportunities in India in the short-to-medium term as India and China are the major growth markets for the fossil fuel,” Amit Kumar, oil sector analyst and Partner PwC India, told Arabian Business.

"Among the two, India is the fastest growing for oil and gas market. Both state-owned and private sector companies are expected to cash in on the growing interest by international companies in the Indian market by diluting part or full stakes in their companies,” Kumar added.

When asked about RIL’s plans to dilute more stake in its refinery and petrochemical business, a company spokesperson said “it is absolutely not true”.

If RIL wanted to dilute more stake, it could have proposed to sell more stake to Saudi Aramco than the 20 percent, the RIL official pointed out.

ONGC spokesperson also said the talks about the company planning to sell its stake in HPCL or MRPL were not true.

Mounting debt

Oil industry analysts said while fuel marketing and petrochemical businesses in India are expected to continue to grow in the coming years, Indian companies are forced to dilute their stakes in their companies due to factors such their mounting debt.

“When promoters are forced to deleverage, they will look for assets which can get maximum value in the current scenario,” Kalpana Jain, Senior Director with Deloitte India, told Arabian Business.

“There is an increasing interest in India’s oil sector, especially fuel marketing and petrochemical businesses, by international oil companies and this could present a good opportunity to Indian companies which are looking to monetize some of their businesses to pay off their debt,” she added.

Kalpana, however, said timing of the proposed stake sale plans by the oil sector companies is important as “they should not cannibalise the market”.

Industry analysts said though increasing use of emerging alternate sources of energy has triggered talks of oil industry as a sun set industry, it may happen in a ‘really long-term basis’.

“As for India, it will be really a long day before the trend of alternate sources of energy, including electric vehicles, catching up,” Jain said.

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