by R. Sasankan

“Success has a thousand fathers/failure is an orphan.”
John F. Kennedy

Some of the interesting battles in the world of global petroleum have started to spill over into India. The canniness and aggression with which certain mid-level players have started to out muscle storied rivals has set up the stage for some riveting stories and interesting outcomes.

India has suddenly become a land of promise for a growing breed of buccaneers in the world of petroleum who had chosen to ignore it earlier because it didn’t hold any allure. That has started to change: not because of sudden discovery of big-ticket oil and gas reserves but rather because of its growing, seemingly unslakeable, demand for petroleum products.

India is now rated a success story: the fastest-growing economy and the third largest importer of crude oil. In their periodic forecasts, organizations like the International Energy Agency (IEA) and IHS Energy have projected India as the world’s largest potential market. Energy experts also maintain that if India ever becomes a middle-income country, petroleum consumption will need to rise 2.5 times, at the very least, from current levels. No other country offers such a massive growth potential today in the world.

Perceptions do change – and they can alter suddenly when these are buttressed by influential forecasts. The Big Boys in the oil industry have always tried to rely on their own studies, surveys and data interpretations before deciding to invest in a particular basin or country. Individually, they go through this practice, but collectively they are perception driven. Remember, almost all big oil players rushed to Vietnam immediately after it became independent on the back of perception that the country was floating on oil. It is a different story that that they eventually drew a blank.

The perception about India has changed because of the potential scope and size of its downstream market. This perception, by virtue of the country’s size, population and rate of growth of the economy, should not normally go wide of the mark. No matter how alluring the prospect, one must realize that the need for traditional transportation fuels in a country like India will only grow and the breathless excitement over electric vehicles is still massively overblown in India when compared with the potential that advanced countries hold out for a new breed of hot rods.

The Middle Eastern players were the first to act when they cottoned on to the implications of these reports and scrambled to gain a toehold in India. Saudi Aramco, the world’s largest oil company, triggered the rush. It roped in ADNOC to invest in the country’s mega refinery project. Out-smarted, Kuwait Petroleum is now trying to find a refinery in which it can invest.

Now, a bigger battle looms. This time round, the players include several international oil majors. ExxonMobil, which had drawn up a strategy to sell LNG in the Indian market, has now been outsmarted by Total of France. Total has never been perceived in India as an aggressive oil major. But it appears to have practically outwitted BP and its Indian partner RIL – two formidable players in India – even as they have been trying to reactivate their virtually moribund 50:50 joint venture, India Gas Solutions Pvt Ltd (IGS). Imported LNG was very much in its scheme of things though it was never spelt out clearly. The gas fields being developed by RIL-BP combine in KG basin are relatively small and do not have the reserves to sustain gas business for long. Therefore, LNG is crucial to IGS’s operations. BP must have had its reasons for temporizing on its plans to activate IGS, which was established in 2011.

Games of one-upmanship and the momentary high of outsmarting a rival is pretty commonplace in the world of petroleum. But it is rare to see someone deliver a knockout punch—which is exactly what Total seems to have delivered by sewing up a deal with the Adanis that has left state-owned Indian Oil Corporation (IOC) virtually out in the cold. The Adanis have dumped IOC lock, stock and barrel from its LNG business. IOC, in its ambition to emerge as the country’s largest gas player, had been negotiating with the Adani group for a stake in the Adani-controlled LNG regasification terminals at Mundra in Gujarat and Dhamra in Odisha. It is not in the DNA of IOC to become a junior partner in any joint venture. It initially offered to pick up equity stake in Mundra and Dhamra but later developed cold feet. Obviously, IOC wanted to be in control of these terminals. IOC is already a partner with Adani in several CGD projects which will continue probably with Total as the additional partner.

After its recent $ 1.5 billion acquisition of Engie’s upstream LNG assets, Total has emerged as the world’s second largest LNG player. It now possesses 10 per cent of the worldwide market share and will be responsible for around 40 MT of LNG annually by 2020. However, it has so far been only a very marginal player in India’s oil sector. Total’s involvement in India began in the late 1970s when its group company, CFP, became ONGC’s consultant in the Bombay High field. The contract, however, was not renewed. Total partnered HPCL’s LPG storage cavern in Visakhapatnam and later picked up a minority stake in the Shell-operated LNG regasification terminal at Dahej.

Total announced its exit from the Dahej terminal a few weeks ago but not many knew that it was planning a major foray into the Indian market. Total is investing in two Adani-owned LNG regasification terminals that can dampen the business prospects of others including that of IOC’s Ennore terminal. Together, the Total-Adani combine will be operating 1500 retail outlets for transportation fuels such as petrol and diesel and CGD, PNG networks. It will certainly try to outsmart Shell and BP in the business of retailing transportation fuels.

ExxonMobil has no significant presence in India though it is the largest publicly listed oil company in the world. It is also one of the top natural gas producers. Exxon Mobil Corporation, headquartered in Texas, is the largest direct descendant of John D. Rockefeller's Standard Oil Company, and was formed on November 30, 1999 after the merger of Exxon and Mobil. ExxonMobil has an extensive global position in LNG with interest in liquefaction capacity of approximately 65 million tons per year.

 Exxon Mobil, which is believed to have hatched a wider strategy for the Indian market, does not seem perturbed over Total’s deal with Adani. Though the precise details of its India strategy are not known, ExxonMobil is keen on selling LNG to Indian market with a dedicated shipping and re-gasification terminal. It may prefer to tie up with a reputed industrial house which can undertake marketing within the country.

Shell is also keenly watching the scene. Apart from enhancing the capacity of its Dahej terminal, Shell does not seem to have any immediate plans for India. It has already pulled out of the consortium for the FRSU planned on the Andhra coast on the ground that there is no scope for another terminal on the east coast now that IOC’s Ennore terminal is in an advanced stage of construction.

India is large geographically and its market for petroleum products is also huge. But one can’t work with potential alone. A lot will depend on the pace of economic growth in the country and the resultant surge in demand for petroleum-based fuels and products. Consultants have often wrecked things for India through overblown estimations, prompting global players to place bets that have gone horribly wrong and killing enthusiasm for further investments in the country.

Patience is the key to success. Senior executives of Shell and BP who have been dealing with India, a couple of years after their superannuation, should be in a better position to enlighten potential investors about the prospects in the Indian market. Wisdom springs from actual experience.