TotalFinaElf pulls out of race for IBP

Vol 5, PW 24 (30 Jan 02) Midstream & Downstream

SERIOUS BIDDERS in the race for IBP Petroleum can heave a sigh of relief.

PETROWATCH learns TotalFinaElf has pulled out and does not even plan to put in a financial bid for the 33.59% stake and management control. That leaves 11 potential bidders in the arena.

Why is TotalFinaElf not bidding "For a mixture of reasons." What are these "IBP has two-year hospitality agreements with oil PSUs for supply of products. This means that IBP is virtually in the hands of oil PSUs for this period.

These agreements may be perfectly normal, but we are not comfortable with them. You can say it is a question of perception." The other reason, we are told, is the quality of IBP's network of 1,500 gas stations.

"The quality of this network is not what we expected it to be." The third, and most important reason is the government's condition that any successful bidder must invest Rs2, 000cr ($416m) in the petroleum or infrastructure sectors. "This is completely unacceptable even though the investment can be spread out over a period of 10 years.

Our management is totally unconvinced about this." TotalFinaElf is not averse to paying an "entry ticket" fee for control of IBP but is put off by the amount. "This concept of entry ticket is there in China also.

But the amount there is just $30m. In Pakistan, you are only required to tie up with a national oil company and invest gradually."