US ambassador Blackwill champions LPG cause

Vol 6, PW 18 (06 Nov 02) Midstream & Downstream

ROBERT BLACKWILL, US ambassador to India, is the new voice of India's free market LPG sellers in their battle against subsidised LPG sold by state refiners.

In early October Blackwill wrote to oil minister Ram Naik for help in "addressing the adverse business environment affecting private investors in the LPG industry in India, caused by subsidies offered exclusively to public sector LPG companies by the government of India." Blackwill makes it clear he's writing on behalf of ChevronTexaco, "the United States' second largest oil company." Back in 1998, ChevronTexaco's subsidiary Caltex invested $11m in a LPG bottling and distribution business in India. This investment - similar to investments by Mobil, SHV Energy and TotalFinaElf - followed a 1997 government commitment to phase out LPG subsidies by 2002.

Yet these subsidies are still in place and are hurting private players hard. According to Blackwill, this has resulted in an "asymmetry" of the Indian market.

"Caltex India's investment has been eroded and the company is experiencing debilitating financial losses," states Blackwill. Private LPG players are petitioning the oil and finance ministries to honour the pledge to phase out subsidies, or give them the benefit of the subsidies enjoyed by state-sector companies.

"I would appreciate your support," writes Blackwill, "in overcoming the destructive distortions that are affecting this industry." Blackwill ends with a warning: "Corrective measures are essential to avoid an adverse impact on current and future foreign direct investment in the petroleum sector."