India Petroleum Update

Action on the refineries front

Indications that Petroleum Minister Mani Shankar Aiyar's EOU refinery strategy could succeed came when Saudi Aramco (the world's biggest company in terms of oil reserves assets), Kuwait Petroleum Corporation and National Iranian Oil Company expressed interest to set up grassroot refineries in India. HPCL and Essar Oil were mentioned as being in talks as potential joint-venture partners.

This is expected to be a win-win situation for either of the sides: big FDI inflows, increased petroleum exports, and increased supply security for India. For the 3 OPEC members represented by SA, KPC and NIOC, it offers a chance to increase its customer base and hence an increased output quota from OPEC.

ONGC meanwhile is setting up a Rs 4,000 crore refinery to process all that heavy crude Cairn discovered recently. Incidentally India has very little heavy crude refining capability, but now with Venezuelan crude entering India in a big way, that looks likely to change.

Foreign Oil Equity Quest

ONGC Videsh will get a little more sprightly in investing abroad as they will now not need a cabinet approval for investments of up to $75 million, as against $50 million before.

The IOC-OIL consortium signed a contract formally acquiring the Libyan oil field it bagged at a bidding last month.

Domestic exploration

ONGC is finding positive signs of gas in its exploratory efforts in the Sunderbans. They are also running into some trouble with the environment lobby, over concerns over the Ridley turtle population getting adversely affected.

Retail

The new entrants into the retail segment in the country are already launching salvos on the pricing front. ONGC launched its auto fuel retailing operations under the OVAL brand name with a rather unique discounting scheme. The first outlet at least had more facilities than the average outlet of the much hyped Reliance.

On its part Reliance is poaching the State Transport Corporations as customers from the PSU giants. A case in point is Tamil Nadu where the decision let to an uproar.