Oil & Gas: Going For A Slick Look

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: The Indian oil and gas sector is all set for a dramatic changeover. On the timeline this year, one will see the fallout of deregulation and policy changes (from April 1, 2002) along with disinvestment of two of the public sector oil companies -- Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL). The government plans to complete the sale by the end of the year. After years of monopoly of the public sector units (PSU), there will be a change in the role and profile of the companies in the oil and gas sector. The PSUs will have to gear up to face competition from the acquirers of these two companies and from the major domestic private sector player, Reliance Industries Ltd (RIL - post merger of Reliance Petroleum Limited).

What is the sector looking like in the new scenario? While ONGC would function primarily in exploration, another major IOC would be concentrating on petrochemicals along with retailing. The government has been very clear from the beginning that ONGC should concentrate only in exploration though it is a less profitable activity. ONGC has been petitioning the government to allow it in downstream activities like refining and marketing but it has not been approved, so far.

The role of IOC as a canalising agency for procuring crude for the other domestic companies would be reduced as oil companies have been given the permission to import crude on their own.

However, IOC would continue with crude trading with other companies, points out IOC chairman MA Pathan. IOC has 40 per cent of India’s refining capacity of 2.3 million barrels a day and accounts for nearly 54 percent share of the domestic demand of 100 million tonne market for petroleum products annually.

While HPCL and BPCL have refineries as well as marketing infrastructure, the acquirers would mainly look at retailing from these two companies. IOC has a network of 9,300 retail outlets, while HPCL and BPCL have around 4,500 outlets each.

Retailing company IBP has been merged into IOC but would continue as a marketing arm of IOC. BPCL has been working towards transforming itself into a purely marketing company for the last few years and have been quite successful.