The move by Petronas to step into India's retail oil and gas business jointly with Indian Oil Corp. will make it easier for the Malaysian state-run company to make inroads in a country where the segment is largely dominated by state-run refiners, analysts told S&P Global Platts.
Еще не зарегистрированы?
Получайте ежедневные электронные уведомления и заметки для подписчиков и персонализируйте свои материалы.Зарегистрироваться сейчас
While international companies like Shell are stepping up efforts for an expanded footprint in India on their own, analysts said the dominant position of IOC will help Petronas to quickly gain expertise and establish a foothold in India where it is also aiming to expand its presence in the clean energy space, in addition to fossil fuels.
"This strategic decision by Petronas to step into India's retail oil sector along with Indian Oil Corp. will make the process of expanding in India very smooth since IOC has a dominant position in the retail oil market," said Kang Wu, global head of oil demand and head of Asia at Platts Analytics.
IOC chairman Shrikant Madhav Vaidya said late last month that the 50:50 joint venture between IOC and Petronas -- called IndianOil Petronas Private Ltd., or IPPL -- will now expand its focus to retail transport fuels, such as diesel and gasoline, as well as city gas distribution.
Currently, the JV has an interest in the LPG business, including LPG terminals and storage units, while it's looking to add value through allied businesses like retailing auto LPG and other non-fuel businesses.
Analysts said the entry of Petronas into India's fast growing fuel retail and marketing business is a welcome step as it provides Indian customers with yet another option in addition to the state refiners and key private players Nayara Energy and Reliance Industries, and to a lesser degree Shell.
"While some part of the capacity of the joint venture could be used for exports, the bulk of this volume will be consumed in the country. This is a thriving segment that both Indian companies and state-refiners are vying to tap into," a senior Indian industry source said.
Tapping IOC's market leadership
Indian Oil Corp. is embarking on a strategic growth path that will aim to maintain focus on its core refining and fuel marketing businesses while making bigger inroads into petrochemicals, hydrogen and electric mobility over the next 10 years, Vaidya recently told Platts in an interview.
The pandemic won't alter India's robust long-term energy demand fundamentals despite creating short-term hurdles, making it imperative to pursue refining expansion as well as expand the footprint in compressed natural gas, LNG, biodiesel and ethanol, he added.
"Therefore, the decision by Petronas to enter the market thus makes strategic sense. The fact that both companies have been working together for almost 20 years now albeit in import of LPG, does provide a level of operational comfort, which can be utilized for this new foray into fuel retailing," the industry source added.
Indian policymakers have said oil will continue to play a critical role in India's energy mix in the foreseeable future, although there will be efforts to meet a part of the incremental demand growth through relatively cleaner and renewable forms of energy.
S&P Global Platts Analytics expects India's oil product demand to grow by an average of more than 200,000 b/d over the next few years, supported by population growth and an increase in disposable personal incomes as its economy continues to expand.
Promising long-term outlook
As per the US Energy Information Administration, global consumption of gasoline will peak by the late 2020s and diesel by 2035.
Transport fuels are expected to see robust demand growth in India as the economy continues to expand and personal mobility demand for an increasingly affluent middle class rises. India's refining capacity is expected to surge from 250 million mt /year now to 300 million mt by 2025 and to 445 million mt by 2030.
Sumit Pokharna, vice president at Kotak Securities, said IOC could sell part of its 32,300 retail petrol stations to the joint venture with Petronas in an effort to monetize the fuel marketing network, extending the existing joint venture to fuel retailing business, including liquid fuels, electric vehicle charging stations and compressed natural gas.
"This will help IOC to improve its marketing margins and volumes in the medium to long term. Also, the monetization of few of its petrol pumps will help in improving the balance sheet," he added.
The Malaysian company's partnership with IOC in the retail fuel business comes after it made its maiden foray into the renewables space with the acquisition of Amplus Energy Solutions, which aims to provide end-to-end solutions for rooftop and ground-mounted solar power projects, and serves the Indian market.
Analysts said these initiatives will help Petronas build on its capabilities in India, where the company traditionally has a wide portfolio across the energy value chain, covering crude oil trading, LPG, petrochemicals and lubricants, in addition to LNG, and more recently, renewables.