WHATآ’S BEHIND ESSOآ’S WITHDRAWAL

Vol 3, PW 3 (03 Mar 99) Midstream & Downstream
     

One report indicates that Esso pulled out because of a threat from Reliances rival 27m t/y refinery at Jamnagar and subsequent distribution of its products via the newly-proposed Central India Pipeline.

This theory is complete nonsense. It is public knowledge that HPCLs refinery is being set up to cater to the demands of northern Rajasthan, Punjab, Himachel Pradesh and Kashmir (areas which Reliance plans to leave alone) and the Central India Pipeline, as its name implies, is designed to serve central India, not northern India.

The real reason behind Essos withdrawal, this report learns, has more to do with the wider implications of Exxons merger with Mobil, and more importantly the Indian governments singular lack of clarity on marketing rights, than competition on the ground. Mobil has a successful lubes distribution business with Indian Oil Corporation (IOC).

In contrast, Esso has a historically tense lube distribution partnership with HPCL. A source in Mumbai tells this report that Esso is keen to develop Mobils solid relationship with IOC, and in particular to work with IOC, "across a range of petro-related activities, possibly even in LPG".

Similarly dismissed as misleading are unconfirmed reports that Esso is in talks with Essar Oil, Bharat-Oman and Mangalore Refineries. "Esso is keen to focus on the bazaar trade in lubricants", said a source, "They wont be interested in refining until the government works out a clear policy which includes marketing".

Indian government rules state you have to invest either Rs2,000 crore (approx: $476m) in a refinery project or produce 3m tonnes of oil annually before being allowed to sell oil products.