Royal Dutch Shell plans retail expansion in India

Out of the total 59,595 retail outlets in India, Shell owns only 85, according to data

Global oil major Royal Dutch Shell has lined up its “most aggressive” expansion plan across the world in the Indian fuel retail segment, which includes selling liquefied natural gas (LNG) through retail outlets.

According to data released by the petroleum planning and analysis cell (PPAC) in May, out of the total 59,595 retail outlets in India, Shell owns only 85. “We have licences for 2,000 outlets. We had around 150 outlets at one time. Since pricing is deregulated now, we do have aggressive expansion plans. It will be one of the most aggressive expansion plans, across the world that Shell has seen,” said Nitin Prasad, chairman, Shell Companies in India.

Prasad added that the company would look at opportunities like bringing LNG into retailing as part of its expansion story. In November 2016, Petronet LNG (PLL), Indian Oil Corporation and Tata Motors jointly introduced LNG as a fuel in commercial vehicles in Thiruvananthapuram. If it works out, Shell’s plan to bring LNG — considered a cleaner fuel — into retailing will be the second such initiative in India. Currently, India is the fourth largest LNG importer after Japan, South Korea and China, and has four LNG terminals with close to 22 million metric tonnes (mt) of re-gasification capacity per annum.

“We are committed to the country on expansion of the retailing business. It will see rapid expansion by the end of this year. We are also building a portfolio of land we are planning to construct on,” Prasad added. Shell's plans for LNG retailing comes at a time when the Ministry of Petroleum and Natural Gas expects India’s LNG import terminal capacity to double to 47.5 mt by 2022.

Fuel retailers need at least 26 licences from various state and central departments, making expansion plans for private players a huge task. Out of the total 59,595 retail outlets in India, other private players like Reliance Industries and Essar Oil have only 1,400 and 3,499 outlets, respectively. Of the rest, 54,607 outlets are owned by state-run companies Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.

In October 2016 BP Plc and Haldia Petrochemicals received licences to set up outlets to sell petrol and diesel. It is widely believed that private players are showing their keenness in expansion after the deregulation of prices in India. According to media reports, the market share of private fuel retailers has zoomed from a mere 4 per cent in May 2016 to almost 12 per cent now.

“DSF (discovered small fields) would never make sense for Shell. We are very clear about that. The small fields will not feature for our business. The total expected production from DSF is less than one year’s annual production from the Panna-Mukta-Tapti fields when it was at its peak. We know where our strengths and capabilities lie. We are certainly going to take a look at open acreage licences. We are always going to look at whatever data is available and measure it with economics,” said Prasad.

Shell Energy Asia Vice-President Ajay Shah, who is in charge of developing markets, added that geology would be the determining factor for Shell’s exploration and production strategy globally.