BP May Partner With Reliance Industries To Open Petrol Pumps In India
BP may expand its partnership with Reliance Industries to enter fuel retailing business.
Six years after entering into a partnership with Reliance Industries Ltd., BP Plc. may be looking to scale up operations in India by venturing into fuel retailing. At least a presentation uploaded by BP on its website indicates as much.
The British petroleum giant’s chief executive officer Bob Dudley will hold a press conference along with RIL chairman Mukesh Ambani later on Thursday. Both companies did not immediately respond to e-mailed queries sent by BloombergQuint.
The presentation, which was uploaded this month, shows that the company wants to increase its presence in the fuel retailing business. Tufan Erginbilgic, the chief executive officer of BP’s downstream business, has been quoted in the presentation as saying that “a downstream business is safer and more resilient, with material and sustainable earnings growth potential.”
The retail business contributed nearly 40 percent to BP’s earnings in the last calendar year, according to the presentation. The energy major has a set a target of generating $13-14 billion free cash flow from its downstream business in 2021. The company also wants to expand its footprint in “new material growth markets” like Mexico, India, Indonesia and China, by setting up 3,000 retail networks in these countries, according to the presentation.
BP had bought 30 percent stake in RIL’s 21 oil and gas production sharing contracts in 2011, entering the Indian oil exploration and production sector. The company has the requisite approvals from the government to set up petrol pumps and sell aviation turbine fuel in the country. India's fuel demand rose by 5.4 percent last month, according to oil ministry’s petroleum planning and analysis cell.
BP’s downstream division includes fuel marketing, lubricants and petrochemicals manufacturing business.
Analysts’ Take
“It makes sense for BP to now enter into India's fast growing fuel retailing market given the fact that upstream business is under pressure due to falling crude prices,” Maulik Patel, oil & gas analyst at Equirus Capital Private Ltd., said over the phone to BloombergQuint. BP’s latest statistical review shows long-term shifts underway and additionally inventories continue to weigh on oil prices, he said.
RIL had recently announced that all its important downstream expansion projects are broadly on schedule. A report put out by brokerage house CLSA’s oil and gas analyst Vikas Kumar Jain said a key catalyst for RIL will be its downstream projects worth $40 billion, which are expected to start operating in 2017.
Citi Research and Bank of America Merill Lynch have also come out with research notes on BP Plc.’s latest presentation with Citi predicting that the British giant’s downstream business could contribute more than 40 percent of its revenue within the next five years. BofA ML, in its report said the new target set for the downstream business exceeds consensus projections.