China aversion ups interest in BPCL
The privatisation of BPCL is expected to benefit from the growing forebodings among oil multinationals about investment in China in the wake of its failings to disclose the coronavirus pandemic.
Besides, the fuel market in the country — India is the world’s third largest consumer — is a big attraction that should ensure aggressive bidding for the refiner, analysts said.
According to official sources, Saudi Aramco, Abu Dhabi National Oil Co (Adnoc), Rosneft of Russia, Exxon Mobil and RIL are likely to battle for the government’s 52.98 per cent stake in the PSU.
The oil industry analysts said the multinationals are sceptical of entering China given the fact the US and other countries are coming together to counter Beijing’s growing threat to global trade, security and human rights, particularly after the pandemic.
The aversion towards China could have a significant influence on their strategies, which consider the long-term impact on their investments — and India could be a beneficiary, starting with the bidding for BPCL.
The deadline for submitting EoIs has been postponed twice and the current deadline ends on July 31.
“I think investment of US companies in India is interesting. I have been to a couple of bilateral meetings with the Indian leaders. What (does) that tell you. People are losing trust in China and India becomes a big competitor.” Larry Kudlow, White House Economic Advisor, said
Analysts said the choice would be limited in a post-Covid world, and India would present itself as a happening place with fuel demand expected to attract investment.
“BPCL with its market share in fuel retailing offers a market in a platter.”
“The global giants such as Saudi Aramco, Adnoc, Rosneft, Exxon Mobil, Shell or BP have cut down on capital expenditure and preserving cash. They would certainly see opportunity in India as demand starts to pick up,” they said.
Analysts at Emkay Global Financial Services said Reliance with virtually nil consolidated net debt was a serious contender.
With its deal with Reliance uncertain, Aramco may be more aggressive now and may also partner Adnoc, Emkay Global said.
The Centre expects fuel demand to return to normality faster than the projections made by the by the International Energy Agency and Opec.
Oil minister Dharmendra Pradhan said by June demand has reached 85 per cent of last year's levels and full normality reached by the end of the second quarter.
He said the country would need an annual refining capacity of 439 million tonnes (mt) by 2030 and 533mt by 2040 from about 250mt, highlighting growing fuel demand in the country.
The disinvestment in BPCL involves the government selling its entire 52.98 per cent stake in the company to a strategic investor with the transfer of management control. The government has barred PSUs from bidding.
Bidders must have a minimum net worth of $10 billion. In a consortium, a lead member must hold 40 per cent stake. The EOI allows changes in the consortium within 45 days, though the lead member cannot be changed.
The government proposes to disinvest its entire shareholding in BPCL comprising 115 crore shares, except BPCL's equity shareholding of 61.65 per cent in Numaligarh Refinery Ltd (NRL).
The shareholding of BPCL in NRL will be transferred to a Central PSU operating in the oil and gas sector under the ministry and accordingly, is not a part of the proposed transaction.