Country chief Vikram Singh Mehta told The Financial Express Shell had no plan to pull out of the refinery joint venture with BPCL, saying that the promoters would only take a decision when their joint feasibility report was ready. The group's blueprint for a `world-class integrated downstream company' is awaiting a nod from the union ministry of petroleum.

Singh would not hint at the scale of investment involved in the Shell-Saudi Aramco venture, but suggested that the project would be one of its kind and a `benchmark' for similar ventures. The venture is timed to take on the market as soon as the last lap of the petroleum sector reforms comes into effect around 2002.

Shell and Saudi Aramco plan to hold 25 per cent apiece in the refining and marketing company and offer the remaining 50 per cent stake to a local partner. A conceptpaper for the venture was first submitted to the IK Gujral government last year.

A couple of months ago the chief executives of the Royal Dutch/Shell group and Saudi Aramco discussed the project afresh with government brass. Singh said that the promoters expected the centre to select the local partner for the downstream project, implying that Shell and Saudi Aramco were angling for one of the five national oil companies.

He said the local partner would `contribute assets,' while Shell and Saudi Aramco brought in `equivalent funds, technology and guarantee security of crude supply'. Shell is estimated to control one of the world's largest reserves of oil and gas, while Saudi Aramco has access to oilfields in West Asia.

Meanwhile, a feasibility study is being conducted by Shell and its partner in the lubricants marketing business, BPCL, for a refinery in Uttar Pradesh. Shell and BPCL plan to take a 26 per cent stake in the venture each and offer the rest to the public.

Mehta said both the proposals --for the refinery in Uttar Pradesh and the Shell-Saudi Aramco joint venture -- were alive and kicking. Shell and BPCL would take a decision on the Uttar Pradesh refinery once the feasibility study was complete, Mehta said adding ``all the reports you have read (to the contrary) are premature.''

At the moment, marketing rights for most petroleum products are the monopoly of the national oil companies, like Indian Oil Corporation, Bharat Petroleum Corporation Limited or Hindustan Petroleum Corporation Limited. Private sector companies are only free to distribute and market decontrolled petroleum products like lubricants, liquefied petroleum gas (LPG), kerosene and more recently, industrial fuels like naphtha and furnace oil.

The constraint could not be the motivation for roping in a national oil company in Shell and Saudi Aramco's downstream venture, since marketing rights are slated to be freed around 2002, which is the terminal year of the oil sector reforms. Transnationals planning big investments, haveshown a tendency to rope in Indian partners, possibly hoping to take advantage of their ``local experience.''

When the Royal Dutch/Shell group made a re-entry into India in 1993, it set up a joint venture with Bharat Petroleum Corporation, which incidentally, was the name given to Burmah Shell after it was nationalised. Bharat Shell has since, been manufacturing and marketing lubricants, which was the first product to be deregulated. The joint venture, in which Shell has the controlling stake of 51 per cent, is marketing LPG in greater Mumbai, as well.

In the span of five years since Bharat Shell came into being, the interests of the Shell Group of Companies in India has swiftly spread from lubricants to oil exploration in Rajasthan and importing liquefied natural gas (LNG). Shell India Production and Development is already slated to dig its first well in Rajasthan by December this year and will bid for deep sea ventures once the New Exploration and Licensing Policy comes into effect.