In talks with Nepal govt to break IOC supply monopoly

Essar Oil has approached the Nepal government for supplying petroleum products. If the proposal is accepted, it will break the monopoly of Indian Oil Corporation, which retails petroleum products in the land-locked country along with the Nepal Oil Corporation (NOC). Nepal is not a very big market and is estimated have an annual demand of 720,000 tonnes of diesel and 1,40,000 tonnes of petrol. Essar currently supplies only small quantities of fuel oil to Nepal.

Confirming the news, Essar Oil’s spokesperson said: “We have made initial forays and discussions with an open mind for both direct and retail business.” If it is able to get an entry, it will be the first international foray in petroleum retailing for Essar, though it exports petro products.

An Essar Oil team visited Kathmandu last week and held talks with Minister for Commerce and Supplies Rajendra Mahato. Sources said the delegation also held talks with NOC chief Digambhar Jha. The company made a presentation, though a senior Essar executive said the meeting was “exploratory in nature”.

A report in the Nepalese media said Jha told the Essar team that NOC can instantly pledge orders for as much as half its total diesel imports. Diesel makes up 60 per cent of NOC´s total business and a 50 per cent share will give the Indian private company a 30 per cent share in Nepal’s total petroleum business.

NOC would prefer to avoid using IOC´s facilities for imports from Essar. So, the NOC chief sought that Essar either lay down its own infrastructure along the border areas or make arrangements with Hindustan Petroleum or Bharat Petroleum, which have adequate facilities in Gorakhpur. It could also use the railways through Birgunj, at the border.

Essar Oil operates a 280,000 barrel-per-day (bpd) refinery at Vadinar in Gujarat. This refinery capacity is being expanded to 320,000 bpd by 2010 and then to 700,000 bpd by 2011.