Oil majors Indian Oil Corp. (IOC) and Bharat Petroleum Corp. Ltd. (BPCL) are in talks to form a strategic alliance in key petro-related areas.
Crude imports is a key area where the two companies will want to exploit synergies. As an industry source revealed, 'There is no point in trying to compete in this area and open gates to competition. The better option is to go in for contractual obligations where the skills and expertise of one company can be used to help the other.' This was reported by a leading financial daily.
Another area that is expected to receive some focus from the companies is natural gas. Both IOC and BPCL already have a stake in Petronet LNG. (Petronet LNG is a joint venture company set up to build liquefied natural gas infrastructure at strategic locations.)
While BPCL is a marketing-driven company, an alliance with IOC may make it possible for the company to make a break in other critical areas like exploration, power and petrochemicals.
IOC and BPCL have already entered into a product swap agreement, which will help them consolidate their market shares in the northern and southern regions of the country. BPCL could use IOC's marketing strength in the northern parts of the country, while IOC will want to exploit BPCL's presence in the south.
In addition to the business synergies, an IOC-BPCL alliance may see a stronger relationship emerging between the two companies, which could insulate them considerably from takeover threats from foreign oil companies.
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