Reliance Industries, BP form joint venture to set up 5,500 petrol pumps; retail aviation turbine fuel for airlines in India

  • Reliance will hold 51 percent stake in the new joint venture, while BP will have the remaining 49 percent

  • This joint venture would assume ownership of Reliance's existing Indian fuel retail network and access its aviation fuel business

New Delhi: Reliance Industries and UK's BP plc have agreed to form a new joint venture to set up petrol pumps and retail aviation turbine fuel to airlines in India, the two companies said on Tuesday.

Reliance's existing 1,400-odd petrol pumps, as well as 31 aviation fuel stations, will be transferred to the new joint venture where BP will hold 49 percent equity stake. Reliance will hold the balance 51 percent in the entity, which aims to expand the retail network to 5,500 petrol pumps in the next five years, the two firms said in a joint statement.

It, however, did not say if BP will pay Reliance any money for getting near half ownership of the 1,400-odd petrol pumps and jet fuel retailing facilities at 30 airports.

The two firms signed heads of agreement on Tuesday and hope to finalise a sales purchase agreement, which will entail investments, in next few months, an official said.

The agreement with BP comes amidst talks Reliance is holding with Saudi Aramco for a possible sale of a stake in the twin oil refineries at Jamnagar in Gujarat. Saudi Aramco, which is said to be keen to buy a quarter of 68.2 million tonnes refineries of Reliance, is also looking to venture into fuel retailing in India to tap the world's fastest-growing energy consumer.

This is the third joint venture between Reliance and BP since 2011.

 Reliance Industries, BP form joint venture to set up 5,500 petrol pumps; retail aviation turbine fuel for airlines in India

Representational image. Reuters.

BP had in 2011 bought 30 percent stake in 21 oil and gas exploration and production blocks of Reliance for $7.2 billion. At that time, another 50:50 joint venture, India Gas Solutions Pvt Ltd, was set up for sourcing and marketing gas in India.

While Reliance-BP has relinquished all but a couple of oil and gas blocks over these years, IGSPL is at a nascent stage.

BP and Reliance in the statement said: "They have agreed to form a new joint venture that will include a retail service station network and aviation fuels business across India".

"Building on Reliance's existing Indian fuel retailing network and an aviation fuel business, the partners expect the venture to expand rapidly to help meet the country's fast-growing demand for energy and mobility," it said.

The country currently has nearly 65,000 petrol pumps, with public sector retailers owning 58,174. PSU retailers have plans to double this network and have already starting appointing dealers.

Russia's Rosneft-backed Nayara Energy, formerly Essar Oil, has 5,244 petrol pumps and has plans to scale them up to more than 7,000 in 2-3 years.

Royal Dutch Shell Plc has 151 outlets and is slated to add 150-200 more petrol pumps.

BP had in 2016 received a license from the government to set up 3,500 petrol pumps in India.

"This is a further development of Reliance and BP's longstanding partnership, which began in 2011 and expanded in 2017 including an agreement to seek options to work together to develop differentiated fuels and mobility businesses," it said.

India is expected to be the fastest-growing fuel market in the world over the next 20 years, with the number of passenger cars in the country estimated to grow almost six-fold over the period.

"Reliance and BP's venture will incorporate and build on Reliance's current fuel retailing network of over 1,400 sites across India, which the partners aim to grow rapidly to up to 5,500 sites over the next five years," it said. "This joint venture will also include Reliance's aviation fuels business, which currently operates at over 30 airports across India, providing participation in this rapidly-growing market."

Reliance Chairman and Managing Director Mukesh Ambani and BP Group Chief Executive Bob Dudley signed heads of agreement for the venture in Mumbai.

"We are delighted to expand our partnership with BP, one of the global leaders in the fuel-retailing sector. This partnership is a testimony to the strong ties between BP and Reliance. Our robust partnership in developing gas resources in India has now expanded to fuel retailing and aviation fuels. This transformative partnership will deepen our engagement with the consumers in further enhancing the world-class services across the country," Ambani said.

"India is set to be the world's largest growth market for energy by the mid-2020s. BP is already a large investor here and we see further attractive, strategic opportunities to support this growth.

"We are working closely with Reliance to develop India's gas resources, helping meet the country's demand for that key fuel. Together we will work to provide consumers across India the high-quality fuels, convenience retail and services they need, continuing to drive modernisation and mobility solutions across the country," Bob Dudley said.

Final agreements will be reached during 2019 and subject to regulatory and other customary approvals. The transaction will be completed in the first half of 2020, the statement said.

"The new venture will seek to offer Indian consumers high-quality differentiated fuels and services at its network of sites, benefitting from Reliance's extensive retail business experience and market-leading access and digital connection to consumers through its Jio digital platform," the statement said. "BP will bring its international experience in convenience and fuel retailing and aviation operations. Castrol lubricants will also be available across the venture's network."

The venture will seek to expand its reach, broadening access through mobile fuelling units and providing packaged fuels to customers, including home delivery.

The venture is also expected to benefit from access to competitive fuels supplies from Reliance's Jamnagar refining complex in Gujarat on the west coast, the world's largest refinery complex.

Since the formation of their upstream oil and gas partnership in 2011, the two companies have invested over $2 billion in deep-water exploration and production to date.

The two are investing $5 billion in three new developments in the KG D6 block - the 'R-Series', the Satellites cluster and the MJ project to produce a total of around 1 billion cubic feet of gas a day, with the first project expected onstream in 2020, the statement said.

(Disclosure - Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd)

Updated Date: Aug 06, 2019 19:13:39 IST