Rosneft, Trafigura, a Singapore-based trading firm, and UCP, a Russian financial investor, will acquire a combined 97.4 per cent stake in Essar Oil’s refining and retail assets, the Vadinar port and related infrastructure.
Once the deal is complete, Rosneft will have access to India’s largest private fuel retailing network. Essar Oil operates a nationwide network of 2,700 fuel pumps.
“As new players enter retail marketing, the pricing methodology is expected to change and global practices will be followed. Customer offerings and product differentiation will change. With crude oil prices going up, dynamic pricing will be seen too. Retailers will track customer behaviour more closely to tailor offerings,” said Deepak Mahurkar, director, oil and gas, PwC India.
Indian Oil Corporation operates 25,363 fuel retail outlets, Bharat Petroleum Corporation 13,439 and Hindustan Petroleum Corporation 13,802. Besides Essar Oil, Reliance Industries is in the process of re-starting its 1,400 retail outlets, of which over 1,000 are operational.
Shell is also present in fuel retailing but has a limited number of outlets. Earlier this month, the government gave BP the go-ahead to set up fuel retailing outlets in India. Unlike BP, Rosneft will have ready access to a retail infrastructure in India.
“With Rosneft entering, the retail space is what one should watch out for. It makes a lot of sense for Rosneft to ramp up the retail business and de-risk the crude business,” said an oil and gas analyst with a domestic brokerage firm who did not wish to be named.
The deal may increase pressure on state-run oil companies to fight competition. Petrol sales in the country were up 15 per cent in 2015-2016 and diesel sales were up 8 per cent.
“State-run oil companies will need to do a lot more as the deal will lead to the location- and timing-based pricing. State-run oil companies are only 20-30 per cent automated,” another analyst with a domestic brokerage firm added.
“India needs more refinery investment. With foreign investors showing confidence in the market, the sentiment will turn positive,” said Mahurkar. However, other experts pointed out there was no significant refining capacity up for sale in India.