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India may privatise BPCL stake
FINANCE & INVESTMENT
THE Indian government is reportedly leaning towards selling its controlling stake in refiner Bharat Petroleum Corporation Ltd (BPCL) to either a private company or an international major.
New Delhi believes that it can receive a better price if it sells its 53% stake on the open market rather than to a state-run company, newswire Cogencis quoted an unnamed senior govern- ment official as saying.
The source’s comments come after local daily Business Standard revealed at the start of the month that the central government was looking to offload the stake as part of efforts to meet its INR1.05tn ($14.68bn) disinvestment target for financial year 2019-20.
The official declined to give the newswire the government’s timeline for such a sale.
While media speculation has been mounting that New Delhi would sell the stake to state-run Indian Oil Corp. (IOC), CNBC-TV18 reported earlier this month that the Ministry of Finance had voiced its concerns that this would give IOC too much control over the oil marketing space.
India’s oil product sector is dominated by IOC, BPCL and Hindustan Petroleum Corpo- ration Ltd (HPCL) and the government wants to attract greater foreign and private investment into the market.
“Privatisation would realise a higher price, may help take politics out of auto fuel pricing, would ensure IOC’s ability to pay hefty dividend to the government of India is not impaired and may improve market sentiment, as it would be seen as big bang reforms,” ICICI Securities said in a client note.
New Delhi sold its 51% stake in HPCL to state-run explorer Oil and Natural Gas Corp. (ONGC) in early 2018 for INR370bn ($5.17bn). While the deal was concluded at around an 18% premium to prevailing prices, the government was criticised for not privatising the company to shake up the sector and also for not getting more for the stake.
While foreign investors have already begun entering India’s downstream, so far these have involved state-backed compa- nies. Russia’s state-run Rosneft has invested in the 20mn tonne per year (400,000 bpd) Vadinar refinery, while Saudi Aramco is in the process of buying a 20% stake in Reli- ance Industries Ltd’s (RIL) chemicals and refining business.
BPCL’s privatisation, an indication the gov- ernment is ready to loosen its control over the downstream, would be a welcome sign to inter- national majors.
Pakistan, Iran sign revised gas pipeline deal
PIPELINES & TRANSPORT
THE national gas firms of Pakistan and Iran this week signed a revised deal for the construction of the proposed Iran-Pakistan pipeline (IPP).
Pakistan’s Inter State Gas Systems (ISGS) and the National Iranian Gas Co. (NIGC) agreed terms for a revised deal for the con- struction of the gas pipeline between the two countries.
Sources reported last week that the new deal omits a clause allowing Iran to fine Pakistan for not sticking to the pro- ject deadline, something stipulated by the previous version.
The latest projection for the cost of the pipeline is around $3.5bn, according to industry sources. However, $2.5bn of this has already been invested in the 900-km stretch on Iran’s side that has already been completed. Pakistan’s 780-km stretch has yet to be started.
The original agreement for the IPP, signed between Iran and Pakistan in 1995, was
predicated on the 2,775-km pipeline running from South Pars into Karachi but the most recent iteration of the route involves the gas running from Iran’s Asalouyeh and into Pakistan’s port of Gwadar and then on to Nawabshah.
The pipeline would carry gas produced from the South Pars field – Iran’s portion of the world’s largest gas deposit.
Pakistan is looking to complete its section of the pipeline by 2024, after which it would buy 750mn cubic feet per day (7.75bn cubic metres per year) of gas from Iran.
In February 2014, Pakistan’s then petro- leum minister, Shahid Khaqan Abbasi, told the National Assembly that the project had been made impossible for the time being because of sanctions. He said: “In the absence of international sanctions the project can be completed within three years, but the govern- ment cannot take it any further at the moment because international sanctions against Iran are a serious issue.”
Week 37 18•September•2019 w w w . N E W S B A S E . c o m P9
