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Global oil & gas giant Royal Dutch Shell Plc, a $421-billion company, is eyeing investment opportunities in the Indian downstream segment, especially with the recent deregulation of diesel prices and opening of the market. The company is planning to expand its retail outlet network utilising its existing licence to set up 2,000 fuel stations.
The Netherlands-based energy and petrochemical group might also look at the upstream exploration and production segment and is pinning its hopes on the indications that the government would introduce an open acreage licensing policy (OALP).
"We are looking to expand retail outlet network. The price deregulation happened not so long ago. There are many things we have to get in place. Running a retail station starts with land acquisition, and that takes time. We are doing some work to devise a realistic growth plan," Yasmine Hilton, country chairman, Shell Group of Companies in India, told Business Standard. "We have the potential to grow. We are looking at the right opportunities," added Harry Brekelmans, member of the company's executive committee and director (projects & technology), who was also present.
Brekelmans had arrived in India last week, as part of a business delegation, along with Dutch Prime Minister Mark Rutte. The visit included meetings with Prime Minister Narendra Modi. India had deregulated diesel prices in October last year, linking the domestic rates of the transport fuel with global benchmarks. Since then, multiple companies, including Reliance Industries Ltd (RIL), Essar and ONGC subsidiary Mangalore Refinery and petrochemicals (MRPL), have announced plans to set up retail pumps, even as existing retailers - public-sector firms Indian Oil, Bharat Petroleum and Hindustan Petroleum - brace for competition.
Brekelmans also said, with the government actively reviewing its new exploration and licensing policy (NELP), the company was hoping the policy "develops to an extent where it is competitive".
Hilton added: "We are quite interested in the new policy which suggests the open acreage licensing policy (OALP) will come. We think that will give us a different opportunity to look at." OALP, which gives companies the freedom to choose which blocks they want to bid for and the time of applying for a block, is generally preferred by investors.
Commenting on the domestic debate over production-sharing versus revenue-sharing models of development of oil & gas blocks, Hilton said Shell could work in any regime as long as there was stability across that regime. "Stability means that once we enter into an agreement, it is a long-term agreement. We do not want changes over the period of the agreement. The new government is giving all the right signals," she said.
Shell has already invested close to $1 billion in India and is the only global major to have a fuel retail licence in the country. Against its licence from the Centre to set up a network of up to 2,000 outlets, it has around 75 outlets currently operational. Shell also operates the Rs 3,000 crore Hazira LNG storage and regasification terminal. Besides being a major private supplier of crude oil products, chemicals and technology to public- and private-sector oil companies, it has interests in the lubricants and bitumen segment.
Brekelmans said, as a long-term investor, Shell remained committed to business opportunities in India. These, he said, included gas, as there was significant growth likely in gas demand in India. "This is why we are currently in discussions to further expand the Hazira LNG terminal. We have also signed a memorandum of understanding (MoU) for the Kakinada floating R-LNG facility. This shows our confidence that gas in the Indian market is a sound proposition for the long term," he said.
Asked whether the Modi government had done enough in its first year in office to spur large investments, Brekelmans said: "The direction of reforms is, no doubt, positive and optimistic. We have been committed to India since 1928 and it is hard to see discontinuity. India is an attractive market. The reforms that have been set in motion will aid that attractiveness. And, with this growth will come additional investments over time."
Royal Dutch Shell was recently in the news for its $70-billion acquisition of the BG Group. The announcement, which came in April, was the first major oil-sector merger in about a decade. The deal is yet to be closed. The company had also recently announced setting up an information technology project development centre in Bengaluru, in addition to a research & development technology centre in that city.
GRAND PLANS
Shell in India
- Has marketing licence to set up 2,000 retail outlets
- Currently operates around 75 retail outsets
- Operates Rs 3,000-cr Hazira LNG storage & regasification terminal
- Supplies crude products, chemicals to oil firms
- Is present in lubricants and bitumen business
- To expand retail network
- To bid for oil and gas blocks (hopes hinging on the Open Acreage Licensing System)
