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Shell signs wide-ranging deal with India's ONGC
Anita Jain, FT Syndication Service
1/23/2006
NEW DELHI: Indian drivers may soon be seeing more red-and-yellow Royal Dutch Shell signs when they stop for petrol following the signing of a wide-ranging pact between the energy company and Oil and Natural Gas Corporation (ONGC), India's most profitable state-run company.
The companies signed a memorandum of understanding in New Delhi that covers potential joint operations, including finding, securing, producing, and supplying oil and natural gas inside as well as outside India.
Shell and OGNC will set up a joint steering committee to oversee the agreement and identify opportunities that will be developed into full-scale projects. The companies did not divulge any financial details.
Shell has expressed interest in tapping India's retail market, while ONGC is hoping to leverage Shell's international strength and expertise.
The agreement will bolster Shell's efforts to expand in the Indian retail market, where it operates only a handful of petrol pumps in southern India.
Nearly 95 per cent of the country's gas stations are run by state-owned firms, but private sector companies are planning to enter the segment amid growing demand for fuel.
Shell said that under the terms of the agreement, the companies could set up joint depots that would help Shell meet its licence for 2,000 petrol stations in India more quickly.
Neha Misra, an analyst at The Energy Resources Institute, a think-thank, said, "Shell and ONGC could get together and develop capacity because in the long run, Shell does see itself in the retail sector."
The number of vehicles has tripled in India in the last 15 years to 68m.
Within India, the two companies have agreed to potential joint operations in a number of areas. These include bidding on exploration and production licences, bringing ONGC's natural gas reserves to market, producing more oil from existing fields and developing coal conversion.
The pact also covers joint construction of oil refineries, petrochemical plants, product terminals and depots, the establishment of a bitumen business, supply of oil products, marine fuels, and lubricants and co-operation to improve ONGC's health, environmental, and safety standards.
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