The government is planning to invite top global oil and gas giants to bid for its stake in Bharat Petroleum Corporation (BPCL) and ONGC's stake in Hindustan Petroleum Corporation (HPCL).
The petroleum ministry plans to approach the multinational companies and their investment bankers after the union cabinet clears strategic disinvestment of the first set of companies - which include BPCL, Shipping Corporation and Container Corporation- in a couple of weeks. The government is also likely to push ONGC to sell its 51 per cent stake in HPCL as it can fetch high dividend for the government, said sources.
The top firms include Exxon Mobil, Chevron and ConocoPhillips (from the US), Royal Dutch Shell and BP Plc (the UK), Rosneft and LukOil (Russia), Petro China, CNPC and Sinopec (China), Total SA (France) and Saudi Aramco. "However, it is not clear whether the government would be ready to divest its strategic assets to the Chinese companies," they added.
"These sales are a priority of the government as it fears that the fiscal deficit may widen to around four per cent of GDP against the estimated 3.3 per cent in the union budget," an executive with a refining company said. India's fiscal deficit stood at Rs 5.54 lakh crore in the first five months of this financial year - which is 78.7 per cent of the budgeted deficit. The industry expects that the fiscal deficit to widen in the next seven months if there are no immediate large disinvestments. In the Union Budget, the government had pegged the disinvestment target of Rs 1.05 lakh crore for the financial year 2019-20.
Going by the current market capitalisation of BPCL, the buyer will have to shell out at least Rs 60,000 crore to buy the government's 53 per cent stake and about Rs 30,000 crore for another 25 per cent from the public in mandatory open offer. The total attributable refining capacity of BPCL is about 35 million tonnes (MT) annually. It operates 15,078 fuel stations, which accounts for a quarter of the retailing market share, and 6,004 LPG distributors. In the last financial year, the company posted a 13 per cent fall in consolidated profit to Rs 8,528 crore. Sales went up 22 per cent to Rs 3.4 lakh crore.
HPCL has 18 MT refining capacity and runs 15,127 fuel retail outlets. The net sales of the company rose around 22 per cent to Rs 3 lakh crore in the last financial year, while the profit fell 7.3 per cent to Rs 7,218 crore. The market valuation is around Rs 47,000 crore.
Addressing the questions on ONGC's inability to derive any benefit out of its expensive HPCL acquisition, Oil Minister Dharmendra Pradhan on Monday said the state-owned firm was free to sell its stake in the oil refining and marketing company. ONGC paid Rs 36,915 crore to buy government's 51 per cent stake in HPCL. It helped the government to meet its disinvestment target in 2017-18.
The global oil and gas companies are now showing interest in getting into the Indian market. Recently, French giant Total SA announced the acquisition of 37.4 per cent stake in Adani Gas, which retails compressed natural gas to automobiles and piped cooking gas to households besides developing import terminals and a national chain of petrol stations. Oil and Natural Gas Corporation (ONGC) has signed a Memorandum of Understanding (MoU) with US petroleum giant Exxon Mobil on 14 October to co-operate in exploration and production. ONGC chairman and managing director Shashi Shanker said, "This meaningful partnership with Exxon Mobil will be a step towards unlocking value in ONGC Petroleum Exploration Licence (PEL) offshore blocks, study open acreage areas and enable us to get closer to meeting country's energy aspirations".
BP Plc has 30 per cent stake in Reliance Industries-operated oil and gas blocks. Besides, they entered into a joint venture to set up 5,500 fuel stations across the country. Reliance has also announced Saudi Aramco's plan to pick up stake in former's refining and petrochemical assets in Gujarat for over Rs 1 lakh crore. Early this year, Canada-based Brookfield Asset Management's India Infrastructure Trust acquired Reliance's loss-making entity East West Pipeline for Rs 13,000 crore.
On a visit to New Delhi to attend an industry conference, Total Chairman and CEO Patrick Pouyanne said the company was interested in investing in downstream petrochemicals and retailing market in India but was "not interested in Indian refineries". BP CEO Bob Dudley said it was "early days" for the privatisation of BPCL. "We need to see what is on offer," he said.