Old rivals of corporate India — Reliance Industries (RIL) and Essar — are back to competiting against each other. Both are bidding to acquire the retail assets and lubricants business of BP in five African countries — Zambia, Malawi, Botswana, Namibia and Tanzania.
According to two independent sources who did not wish to be identified, both Essar and RIL are likely to place bids in the range of $400-450 million (Rs 1,844-2,075 crore). However, BP is expecting $500 million (around Rs 2,300 crore), they said.
The executives said the two Indian companies may submit the bids by the end of this week. RIL and Essar are the only companies bidding for the entire portfolio of 220 retail outlets, along with the lubricants business.
Most other players, including local companies, are likely to bid for piecemeal assets. BP plans to sell assets worth up to $30 billion over the next 18 months to fund the mounting costs of the massive oil spill in the Gulf of Mexico.
“From a seller’s point of view, if someone is bidding for the entire assets on the block, then they would naturally tend to prefer that. But everything will boil down to the actual money one puts on the table, as that’s what matters in a competitive bidding environment.”
When contacted, officials from both RIL and Essar said: “As a matter of policy we do not comment on market speculation.” Africa is a critical and strategic market for both the Indian oil and gas giants.
Last week, Essar Group’s chief executive, Prashant Ruia, had admitted the group was exploring the opportunity. “We are in the race with about a dozen other companies. It is in the early process. There are about five-six countries. We are going to look at all,” he had told reporters.
It was not clear if Essar would go alone or strike a joint partnership for the bid. Sources said in all probability Essar Energy will bid alone for these assets.
Essar Energy Overseas Ltd, a subsidiary of Essar Energy Holdings, has a 50 per cent stake in the 80,000 barrels per stream day (bpsd) Kenya Petroleum Refineries Ltd, where the Kenyan government is the other big stakeholder. Essar had acquired the stake in 2009 from its earlier shareholders, Shell Petroleum Company Ltd, Chevron Global Energy Inc and BP Africa Ltd.
Similarly, Reliance Industries (Middle East) DMCC a subsidiary of RIL, registered in the UAE, took over management control and majority shareholding of GAPCO Mauritius in July 2007.
GAPCO is one of the largest independent petroleum marketing and trading organisations and is primarily involved in petroleum product imports, retail and wholesale marketing, trading, storage, distribution, supply and transport of oil products to the countries in East and Central Africa.
# RIL, Essar finalise bid for BP's petro retail assets in Africa
# BP keen to sell its 220 retail outlets and lubricants biz
# Outlets in 5 countries: Zambia, Malawi, Botswana, Namibia, Tanzania
# BP expects $500 mn from sale
# Bids expected in $400-450 mn range
# Bids likely by August 6
Its own retail operations of 132 outlets are spread across Tanzania, Uganda, Kenya and Rwanda. GAPCO also has its own large coastal storage terminals in Dar-e-Salaam (Tanzania), Mombasa (Kenya) and an inland terminal at Kampala (Uganda).
Analysts said for both players, it makes sense to capture the entire value chain. “Africa is a growing market and countries like Bostwana are growing much as the BRIC countries. There is political stability in many of these markets, too. So, these are strategic markets to expand. The last-mile connectivity (petrol pump outlets) is also critical as margins improve to the extent of 2-5 cents/tonne. Essar already has a refinery in Africa and RIL exports nearly 50 per cent of their refining capacity of 60 million tonnes,” said a research head of a foreign brokerage firm.