After nearly two years of wrangling, BP plc has won an 'in-principle' approval to retail aviation turbine fuel (ATF) to airlines in India.
While the Petroleum Ministry has given nod to BP to enter Indian aviation fuel supply space, the Europe's second-largest oil company will have to take environment and safety as well as airport clearance before actually beginning jet fuel sales.
"BP has been granted 'in-principle' approval to market aviation turbine fuel (ATF) in India. We see a great future for aviation in India and are excited to be involved in this market and contribute to its future development and success," a company spokesperson said.
BP Exploration (Alpha), a wholly-owned subsidiary of BP, had on June 11, 2014 submitted an application for authorisation to market ATF. It claimed to have invested USD 477 million in the country.
The Oil Ministry initially rejected BP's application on the ground that its investment does not qualify for a retailing licence but kept the door open for the company by saying it can still get the licence provided it meets the eligibility criteria.
The Ministry, rejecting the application, said only USD 171 million of the claimed investment was capital expenditure and the rest operating expenditure.
For a licence to retail auto fuels petrol, diesel and ATF, a company should have invested a minimum of Rs 2,000 crore in exploration or production, refining, pipeline or terminals leading to additionality to the existing assets or creation of new assets in the eligible activities.
BP's USD 171 million investment was just over half of the investment threshold.
The company subsequently was able to satisfy the ministry of its investments to win the in-principle nod.
BP had in its application stated that out of the USD 477 million, USD 259 million was capital investment. Besides, another USD 2.3 billion is planned to be invested most in exploring and production oil and gas from eastern offshore.
Its USD 7.2 billion spending in buying 30 per cent stake in 21 exploration blocks of Reliance Industries is not being considered as capital investment.
"Air BP aims to build a strong, sustainable and material business in India, drawing upon our global expertise combined with the skills of a strong local partner," the spokesperson said.
Air BP - BP's aviation division - is one of the world's largest suppliers of aviation fuel products and services. Air BP has a network of operations at over 700 locations in around 50 countries and sells over seven billion gallons of aviation fuel a year.
India is currently the ninth largest aviation market in the world. Its jet fuel market is circa 5.9 million tonnes per annum and is expected to continue to grow significantly to support the growth of the Indian economy.
In the gas price arbitration, they contended that they
were entitled to get a new rate from April 1, 2014, after expiry of the 5-year term of USD 4.2 per mmBtu rate.
The previous UPA government, in June 2013, had approved a formula linked to global benchmarks, potentially doubling rates to USD 8.4 per mmBtu from April 1, 2014.
The Election Commission, however, in March 2014 asked government to defer an increase until the completion of the Lok Sabha elections.
The new NDA government then put the previous decision of the UPA government on hold and in October 2014 announced a new gas pricing formula that led to a rise in rates to USD 5.61 per mmBtu in November 2014, which subsequently dropped to USD 3.82.
The marketing freedom announced on Thursday will be subject to a cap which will be lower than the one-year average cost of imported cost of fuel oil, or landed price of liquefied natural gas (LNG) or weighted average of imported price of coal, fuel oil and naphtha. Based on 2015 prices, the lowest of these averages comes to USD 7.08.
