Companies

Can BPCL attract Exxon’s of the world?

Richa Mishra New Delhi | Updated on October 01, 2019 Published on October 01, 2019

US looking at India’s energy space more diligently after the ‘Howdy Modi’ success

Whether the likes of ExxonMobil throw their hat in to participate in the Indian government’s ambitious strategic sale proposal of oil refining-cum-retailing public sector entity Bharat Petroleum Corporation Ltd (BPCL) remains to be seen.

A section of industry feels that there is a strong change of Americans looking at India’s energy space more diligently following the “Howdy Modi” success and the Prime Minister Narendra Modi’s separate interaction with the CEOs from the US oil and gas sectors. However, there are those who feel that interests could come in from friends like – Saudi Aramco or Abu Dhabi National Oil Company.

It is anyone’s guess now with the core group of secretaries on divestment (CGD) reportedly having cleared a proposal on privatisation of five PSUs including BPCL. According to reports, the proposal was for the strategic sale of entire 53.29 per cent stake of the Government of India (GoI) in BPCL to the private sector. Depending on the competitive intensity during bidding, likely proceeds for the government could be in the range of Rs 60,000 crore -- Rs 70,000 crore at the full stake sale, according to industry.

“In my personal view, the government should get out of BPCL completely by selling maximum possible shares to the public and others. BPCL is among the best public sector enterprises in the country, thanks to its history and DNA. It may not be a bad idea to hive off its refinining and overseas businesses into two separate entitities before selling for the purpose of maximising returns,” said Narendra Taneja, Energy Expert.

He, however, is quick to add that “Indian Oil and ONGC must remain under the government’s full control to take care of the country’s downstream and upstream energy security, but divesting the state stake in other oil companies aggessively makes loads of sense”.

“Similarly, the government must maintain the full control in the GAIL India Ltd for the purpose of the country’s natural gas security. The coming three decades belong to natural gas,” Taneja feels.

K. Ravichandran, Senior Vice President, Group Head-Corporate Ratings, ICRA Ltd , “From the government perspective, it would make eminent sense to disinvest, as it’s likely to command a premium over the prevailing market capitalisation, given the potential for value unlocking from the current businesses and control premium. Moreover, despite losing one oil marketing company (OMC), it will have control over two PSU OMCs, if it wants to have some say on the pricing of sensitive petroleum products when international oil prices stay elevated.”

Also, the purported disinvestment will heighten the competitive dynamic for fuel marketing in India, which will be a positive for retail and bulk consumers, he said adding “In the current environment, despite the presence of few private sector/multi national companies, the market is dominated by PSUs.”

Despite deregulation of most of the petroleum products, PSUs rule the roost given their access to massive infrastructure as regards pipelines, depots, ATF dispensing and retail outlets, he elaborated adding “Moreover, private sector is concerned about the policy certainty with regard to pricing freedom on auto fuels – motor spirit and high speed diesel. With a higher share of private sector in marketing, the latter will be more emboldened to invest further in the sector.”

Published on October 01, 2019
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