Govt rejects BP's request to market jet fuel

The government has rejected a request from BP to be allowed to sell jet fuel to the booming aviation market in the country, saying it did not meet the conditions necessary, a source with direct knowledge of the decision told Reuters.

Consumption of aviation fuel is set to rise in the country as domestic air traffic is estimated to almost triple this decade, with more of the nation's 1.25 billion people starting to fly and as airlines connect smaller cities.

Demand for aviation fuel in the country could rise by 2.2 per cent in the financial year beginning in April, according to the Petroleum Planning and Analysis Cell in the federal oil ministry.

BP is not the only overseas company interested in the country's jet fuel retail business, which is dominated by state refiners. Royal Dutch Shell Plc already sells a small volume of jet fuel in a tie-up with state-run Mangalore Refinery and Petrochemicals.

The source declined to cite the precise reason for BP's request being turned down by the oil ministry.

According to rules, marketing rights for jet fuel can be given only to companies investing or proposing to invest at least Rs 2,000 crore ($319 million) in exploration and production, refining, pipelines or terminals in the country.

In 2011, BP agreed to buy a 30 per cent stake in oil and gas blocks operated by Reliance Industries for $7 billion and also invested funds for further exploration and development.

It applied for a jet fuel marketing licence for the second time in 2014.

However, according to the source, who did not wish to be identified, the oil ministry wrote to the company this month saying it did not meet the conditions specified for marketing aviation fuel in the country.

"BP has been continuously engaging with the Ministry of Petroleum and Natural Gas regarding the licensing application and we are confident we meet the requirements," a spokeswoman said in an email.

"We will continue to work closely with the Government authorities and urge them to review the decision," he added.

(Reuters)