Hunt for opportunities in India’s energy space continues, says Shell Companies Chairman

A key player in India’s energy space, Shell has lately been lying low, leading to speculations whether the country still remains an attractive destination for the British-Dutch multi-national.

“India has always been on our radar. It is a misconception that Shell is not interested in India. We continue to seek opportunities here across upstream/ downstream segments, including petroleum retailing as well as biofuels, lubricants and power,” Nitin Prasad Chairman, Shell Companies in India, told BusinessLine .

When asked why Shell did not actively participate in recent oil and gas blocks auctions or invest in LNG (liquefied natural gas) terminal projects, Prasad said: “You don’t see immediate announcements because we haven’t found something that is competitive in our portfolio. By competitive, I mean the asset through its lifecycle should be able to match up against what our alternatives will be in the rest of the world.”

Prasad, who succeeded Yasmine Hilton in October 2016 as the Chairman of Shell Companies in India, said: “Last 15 years we have looked at upstream opportunities in India at least four times and also seriously looked at different structures and formats of business models. We have also looked at East Coast a number of times... Remember exploration is not cheap.”

Stating that India’s Open Acreage Licensing Programme is a positive step forward as it is quite progressive in terms of what it suggests and what’s available, he said there were still some challenges.

While data access has improved and better environment has been created, but the area of dispute resolution is still worrisome, Prasad said, adding, “There are jurisdictions where it is difficult to resolve a problem and that makes it difficult to do business”.

Giving an example, Prasad said: “The oil and gas industry inherently is risky and asking for certainty in terms of what I can produce tomorrow or day after or 10 years down is not easy to predict.”

Best endeavour basis

Besides, every contract has a line that says ‘resolve issue on best endeavour basis’. But if that best endeavour basis does not exist with flexibility and adaptability then every time there is a difference, one has to arbitrate, he said, adding that “which is a time consuming process”.

Ask him if the Panna-Mukta-Tapti fields (PMT was joint venture between ONGC-BG (now acquired by Shell) -Reliance Industries) stands dismantled now that Shell has exited, he says, “It was an unincorporated joint venture, so once a partner has exited it no longer exists.”

Gas trading hub

LNG is one business in India where Shell has been one of the first entrants with terminal at Hazira. On whether the Indian market is matured enough to handle a gas trading hub, he said, “It is a great concept, but it is challenging. Industry has given its inputs -- I am co-chair of CII of hydrocarbon committee. It is quite complex.”

“From my perspective, there are a few issues in the gas value chain that needs to be sorted out so that it allows the gas value chain to function and move forward. Currently, it limits the true potential of the chain, because there are lot of latent demand in the market and it needs new business models, new approach, and new segments to be opened up like LNG into transportation,” he said.

Prasad believes that “if we can create a marketplace where people can have trust in the independence of the market and allow transactions to exist, I suspect you will see it (trading hub) as a big enabler for the huge demand and supply to grow in the country.”

But, the key is accessibility of affordable gas, he said. “What needs to be addressed is that do we have the right business models in place to have infrastructure to be used in most efficient way and do we have the most economical structures,” Prasad said, adding that for the hub to be successful it must have criticality of transactions — there must be sufficient transactions happening in the market place.

Petroleum retailing is one business where Shell has held its ground in India and today with a more deregulated policy all it seeks is consistency. “Last couple of years have been very positive we have moved past the subsidisation structure and business is equitable,” he said, adding “now there has to be consistency. The consumer is getting assurance on quality and quantity of fuel”.

Retail outlets should be seen as job creators, he said, adding that Shell sees them as mosaic of solutions. But, India also needs to address the wholesale pricing formula which has not been revisited for sometime now. Though there is refining capacity to meet demand products are imported. “Import price is much higher than the domestic price which fractures the market,” he said.

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