US-based Chevron Corp, one of the largest integrated oil & gas producer in the world, has initiated talks with a couple of Indian companies to sell some of its downstream African assets. The discussions are at a very nascent stage, sources close to the development said.
“Chevron is interested in selling some of its downstream assets in Africa to Indian companies and the discussions are in the initial stage,” the source told VCCircle. But he declined to divulge the names of the Indian companies or the details of the assets.
Downstream oil assets typically cover refineries, petrochemical plants, petroleum product distribution, retail outlets and natural gas distribution companies.
An e-mail query sent to Chevron Corporation seeking comments remained unanswered at the time of posting this story.
In India, the oil and gas sector is dominated by PSUs while Reliance Industries and Essar are the two major private players. And, cross-border M&A activity has been robust particularly in the oil and gas and natural resources space as companies eye energy security.
Indian companies, led by Public Sector majors, have been actively looking for oil & gas assets abroad, mainly in the upstream asset class, though it is far behind than that of Chinese companies which spent a record $ 32 billion in 2009-10 versus India’s single $2.1 billion investment by ONGC for the same period for Russia’s Imperial Energy.
Companies like ONGC, IOC, BPCL and HPCL are bidding for oil blocks worldwide, especially in the African, Latin American regions.
India’s largest conglomerate Reliance Industries (RIL), in a time frame of four months in the beginning of 2010, bought three shale gas assets in the US. In April, it acquired a 40% stake in Atlas Energy Inc.’s core shale acreage in Marcellus for $1.7 billion. In June, it paid $1.35 billion for a 45% stake in Pioneer Natural Resources Co., and paid $392 million, or around Rs 1,810 crore to buy 60% stake in the Marcellus shale acreage in the US.
Reliance acquired many shale gas assets in the US while Essar, in 2009, acquired 50% stake in Kenya Petroleum Refineries Ltd (KPRL) with a 4 MMTPA capacity from Shell, BP and Chevron. In April 2009, Reliance Industries Limited bought back Chevron Corporation's 5% stake in Reliance Petroleum Limited.
Chevron Corporation owns refineries in the United States, the United Kingdom, Canada, South Africa and Australia and markets petroleum products under the brands of Chevron, Texaco and Caltex worldwide. In the Asia-Pacific region, southern Africa, Egypt and Pakistan, it uses the Caltex brand.
As a part of restructuring of its global refining business, Chevron Corporation, in March 2010, announced plans to sell some of its global operations.
Chevron, which had been hit by an overcapacity in crude-refining bought on by recession and the high price of crude last year, had cut production spending on refineries and other operations by 15%, to $2.9 billion for 2011. The company, which is focussing more on upstream businesses, has been on a selloff mode of its downstream business since the last two years which saw many transactions across Africa and Latin American regions.
Recent selloffs by Chevron
Last month, South African downstream petroleum marketer Engen announced that it had concluded three deals to acquire some of the sub-Saharan Africa and the Indian Ocean Islands assets previously owned by Chevron.
In November last year, Chevron sold its fuels marketing and aviation businesses in parts of the Caribbean and Central America to a subsidiary of France-based petroleum company Rubis.
In June 2009, Chevron Africa Holdings, a unit of Chevron, completed the sale of Chevron Nigeria Holdings to Corlay Global, a Panamanian holding company, owned by an African-based consortium composed of MRS Holding and Petroci Holding. During the same period, TOTAL S.A. of France completed its takeover of Chevron's operations in Kenya.