India’s largest private sector oil company Reliance Industries’ tie-up with British petroleum giant BP Plc is likely to significantly impact the market share of public sector oil marketing companies (OMC) in the Indian market.
According to global financial services major Morgan Stanley, the agreement between the two private-sector energy giants is likely to see them command around 8 per cent of the retail market by 2025. “If the RIL-BP venture hits its target for fuel stations, it would account for nearly 8 per cent of pump stations by 2025. We see an impact on OMCs’ market share both in aviation and auto fuels,” it said.
The Reliance-BP venture will see RIL’s 1,400 existing pump stations being ramped up to 5,500 over five years, while also increasing outlets in the lucrative aviation fuel segment from 30 to 45. Last week, Reliance and BP had disclosed more details of the partnership, where BP has bought 49 per cent stake for $1 billion.
“Targeted fuel station additions would be nearly equivalent to two-thirds of annual station additions by (state-owned) oil marketing companies,” said Morgan Stanley. “This should also help RIL sell more refined products domestically as refinery export restrictions ease.”
According to analysts, market leader Indian Oil Corporation is likely to be affected the most. “Bharat
Petroleum Corporation Ltd (BPCL), which has the highest exposure to highways, could see more aggressive pricing as RIL-BP would target these areas where throughput per outlet is higher,” it said, “We see limited impact to HPCL considering its higher exposure to cities, which are normally tougher for new players to enter considering long-term leases even for dealer-operated stations.”
However, both BPCL and HPCL have tried to protect their market share in the past and they are seen keeping that stable, going ahead.
The Reliance-BP deal had first come to the limelight in August, when RIL had said that BP will pay about Rs 7,000 crore for acquiring 49 per cent stake in its existing petrol pumps and aviation turbine fuel network.
This is the third joint venture between Reliance and BP since 2011. BP had in 2011 bought 30 per cent stake in 21 oil and gas exploration and production blocks of Reliance for $7.2 billion. At that time, another 50:50 joint venture, India Gas Solutions, was set up for sourcing and marketing gas in India.
India currently has 66,408 petrol pumps, with public sector retailers owning 59,831. PSU retailers have plans to double this network.