Indian state oil company tipped as Shell NZ buyer

The Shell oil company is looking at selling all of its petrol stations in New Zealand - and a stake in the Marsden Point refinery - and news reports say the buyer could be an Indian oil company.

"Hindustan Petroleum Corp (HPCL) appointed PricewaterhouseCoopers as its consultant for the (potential) deal last week," a senior HPCL executive told the Dow Jones newsagency, on condition that he was not named.

The executive said the plan is in initial stages: "It is too premature at this stage to talk about the issue," but the company's chairman, Arun Balakrishnan, rejected the report, which was carried in the Wall Street Journal.

Shell New Zealand Ltd appointed UBS AG in May to find a buyer for its entire downstream assets, apart from its 36 per cent stake in construction and roadwork firm Fulton Hogan.

The assets on sale include Shell's 230 retail fuel stations, a marine business, commercial fuel and aviation operations as well as a 25 per cent stake in Loyalty NZ. Shell's distribution network includes terminal facilities throughout New Zealand. They also include a 17 per cent stake in New Zealand Refining Co's refinery at Marsden Point, which Shell shares with the local units of Chevron, Exxon Mobil and BP to provide about 70 per cent of the nation's oil products.

Shell is also carrying out separate porfolio reviews of its refineries in Quebec - where it is considering closing its Montreal-East refinery - and in Germany.

Mehul Thanawala, vice president in charge of research at JM Financial Institutional Securities in Mumbai, told Dow Jones that free-market pricing in countries outside India offered better returns on investment than than assets in India.

India deregulated petrol and diesel pricing in 2002, but the government intervened again when international crude oil prices began rising, to keep down local fuel prices.

The state-run oil-marketing companies - Indian Oil, Bharat Petroleum and HPCL - lose profits on sale of fuel products at government-mandated prices.

Another analyst, who asked not to be named, said HPCL could consider the acquisition as it could export oil products to New Zealand from its Vishakapatnam refinery in southern India. The company has already announced plans to double output at the 150,000-barrel-a-day facility.

"Both New Zealand and Fiji are geographically easier to approach from south India and HPCL may just consider exporting its products" to these countries, he added.

HPCL, which has more than 8300 retail outlets in India, has an agreement to manage the fuel-marketing business Fijian Holdings it acquired from BP in the southwest Pacific countries of Fiji, Tonga, American Samoa, Vanuatu, Tuvalu and Cook Islands, the newsagency said.

- NZPA