BPCL fears competition from Reliance and Shell

Vol 9, PW 9 (11 Aug 05) Midstream & Downstream

Bharat Petroleum sees Reliance Industries as the main competitor in the business of selling petroleum products within India.

BPCL believes that Reliance is sitting on a huge product pool and doesnt have the kind of constraints that beset public sector companies. More, Reliance is aggressive in giving discounts on volume purchases by state transport companies and other bulk customers, something state-owned companies like BPCL cant offer.

BPCL believes Shell is its other main competitor and fears its low profile and slow but steady penetration of the Indian market. BPCL believes Shell will be strong in selected cities of India.

After Reliance and Shell comes Essar Oil, and competition from fellow state-owned oil companies such as Indian Oil and Hindustan PetroleumHPCL. BPCL is gearing up to meet these multiple threats.

Today, it has 22% market share in petroleum products but its target is 25% by 2010. BPCL recognises it has to grow in volumes as margins will be squeezed by competition in the coming years.

Present refining capacity is 18m t/y spread across its Mumbai refinery and subsidiaries Kochi Refineries and Numaligarh Refineries. Plans are to increase this to 26m t/y in another five years.

Kochi Refineries has a capacity of 7.5m t/y and will be expanded to 10m t/y by 2009. BPCL also plans to go ahead with its long pending 6m t/y Bina refinery project in Madhya Pradesh, with plans for it to be operational by 2010, producing products for the central and north Indian market.

Like other petroleum marketing companies, BPCL sees growth in northern and western India. The company now has 6600 petrol pumps and will increase this number to 7500 by March next year.

BPCL recognises that increasing the number of petrol pumps is marginally effective and instead aims to boost the volumes sold by each pump.