Russian, Saudi firms unlikely to bid for BPCL privatisation

Weak demand cited as hurdles in investment plans, as govt weighs options to finance welfare schemes and bridge fiscal deficit

At Friday’s closing price of Rs 412.70 on BSE, the government’s 52.98 per cent stake in BPCL is worth ₹47,430 crore. Image: Twitter

Rosneft and Saudi Aramco are unlikely to bid in the privatisation of Indian refiner Bharat Petroleum Corp, sources have told Reuters. Low oil prices and weak demand have restrained their investment plans, it added.

Russia’s Rosneft had expressed interest in buying the government’s 53.29 per cent stake in BPCL when its chief executive Igor Sechin visited Delhi in February. At that time, the government said that Saudi oil giant Aramco was enthusiastic about the stake sale.

A Rosneft source, however, said it will not buy BPCL, while another said the Russian oil major would only be interested in BPCL’s marketing business, which comprises fuel depots and over 16,800 fuel stations.

The government needs funds to finance welfare schemes and bridge a fiscal deficit that has already topped the annual target. The government aimed to raise $8-$10 billion through the sale of its stake in BPCL. But BPCL’s share price has plunged nearly 30% over the past year to trade at around ₹386 a piece on Tuesday.

“This is not the time to invest in refining… demand would be there for oil to chemicals and not conventional products,” a source familiar with Saudi oil giant Aramco’s thinking said. The Saudi government discussed BPCL’s privatisation with an Indian oil ministry official in July, according to a ministry document.

Related news: COVID crisis: BPCL sale may get pushed to next fiscal year

Another source familiar with Aramco’s thinking said that after showing interest initially, Aramco has not submitted a formal expression of interest (EoI) even though the process was extended by two months to September 30.

Sources said neither Rosneft nor Aramco see much value in refining as the government in Kerala, home to BPCL’s biggest refinery, might challenge the privatisation in court and BPCL’s two other refineries are in cities, leaving little scope for revamp and expansion.

Sources reported last week that India’s efforts to privatize BPCL could spill over into the next fiscal year. “Aramco has not participated in the EoI so far. Initially we had expected them to show interest. We are weighing our options,” said a government source.

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