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Regular-article-logo Tuesday, 08 July 2025

SHELL REVIVES OFFER TO BUY OUT HINDUSTAN PETROLEUM 

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FROM R.SASANKAN Published 05.03.99, 12:00 AM
New Delhi, March 5 :     The Shell-Saudi Aramco combine has revived its offer to buy out either Hindustan Petroleum Corporation Ltd (HPCL) or Bharat Petroleum Corporation Ltd (BPCL) in a concerted effort to enter the Indian market. The combine has not evinced any interest in IBP Ltd, the smallest oil marketing company with a little over 4 per cent market share, even though it is ready for the deal. The earlier offer made last year by Shell-Aramco did not evoke a formal response from the government. Shell, which understands the political vagaries of the shaky BJP-led coalition government at the Centre better than its Saudi partner, decided not to pursue the matter. The BJP-led government is now perceived to be soft on multinationals even at the cost of domestic companies. Petroleum industry circles say Shell persuaded Saudi Aramco to back out of the HPCL-promoted Bhatinda Refinery. Almost simultaneously, Shell pulled out of the 6-million tonne refinery it had proposed with BPCL in Uttar Pradesh. The deregulation package for the petroleum sector approved by the government stipulates that private companies can enter trading in petroleum products only if they invest a minimum of Rs 2,000 crore in refineries. But merely pumping in the funds will not provide them a ready-made marketing network. Both BPCL and HPCL have a country-wide marketing infrastructure, besides refineries. Indian Oil, the other oil major with an unmatched marketing muscle, is beyond their reach. It will not be easy for the BJP-led government to hand over either BPCL or HPCL to a multinational given the fact that the issue can assume strong political overtones. Even as these buyout overtures continue, sources say neither BPCL nor HPCL have been taken into confidence by Shell-Aramco before it made the offer to the Gujral government. Apart from political opposition, the move will be resisted by Indian Oil. The Ambanis of Reliance, which is setting up the largest refinery in this part of the world, will also block the entry of Shell because it could wreck the fortunes of domestic players. Sources recall a similar move during the Congress regime when the erstwhile petroleum minister Satish Sharma sought to hand over Bombay High, the country's largest oilfield, to multinationals on a production-sharing basis. The proposal, which was sent directly to the minister by Occidental, was rejected by the ONGC management. Nevertheless, Sharma forced the PSU oil producer to go in for a limited tender. The ONGC management did not muster the courage to defy the minister but it ensured that the minister did not have his way. IBP's motivations to join the Shell-Aramco fold are different. Desperate for a larger role in the Indian market, its proposal for a merger with stand-alone refineries like Cochin Refineries Ltd (CRL) and Mangalore Refineries Ltd (MRL) is unlikely to be endorsed the by the special committee weighing its feasibility. There are, however, growing indications that these refineries will be advised to go with BPCL. IBP's limitation is that its marketing network is confined to the eastern region. Multinationals keen to enter India are looking for a country-wide network.    
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