Global oil majors BP Plc and Rosneft PJSC are eyeing a piece of India's $117 billion retail market for fossil fuels, threatening to shake up government-owned companies that have faced little competition for a decade.
BP has already secured licenses to open as many as 3,500 fuel stations in the world's second most-populous nation. Rosneft gained access to about 2,700 pumps through last month's acquisition of Essar Oil Ltd., which has plans to add 2,600 more outlets. Along with Reliance Industries Ltd. and Royal Dutch Shell Plc, the private players will try to chip away at the dominant position of three state-owned enterprises that control 90 percent of market volume.
"Competition is expected to intensify with the entry and expansion of private players and multinational companies," said Rahul Prithiani, a Mumbai-based director at CRISIL, a unit of S&P Global Ratings. Private players and multinational companies are expected to increase their market share though government companies will probably still dominate given their vast network of fuel retailing stations, he said.
Retail sales have become more viable for private-sector refiners ever since Prime Minister Narendra Modi's government scrapped diesel-price controls two years ago. Pricing freedom coupled with record oil consumption as the number of trucks, cars and motorbikes multiply is helping India stand out as a country that global oil majors can't ignore.
The Paris-based International Energy Agency predicts India will be the world's fastest-growing oil consuming nation through 2040.
"This sort of growth they will not get anywhere," said Lalit Kumar Gupta, chief executive officer of Essar Oil. "Europe is virtually saturated, there is hardly any growth. U.S. there is tough competition. India is the only country which is growing and which is growing by a big number and they feel there is scope."
Companies including Saudi Aramco and France's Total SA have shown an interest in India, while existing players such as Shell are planning to expand their footprint, Oil Minister Dharmendra Pradhan said in June, flagging further reforms in the oil and gas sector. More fuel retailers will increase competition and benefit consumers, he said. Continue Reading....
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