To develop its presence outside the country, Indian Oil Corp. (IOC), India’s leading petroleum retail company, is planning to add six outlets in Sri Lanka through its subsidiary, Lanka IOC.
Lanka IOC is making phased investments of around Rs450 crore in the island nation.
The business plan is based on the premise that surplus refining capacity in India will be used to meet the needs of Sri Lanka.
The only other foreign country IOC has a retail presence in is Mauritus, through Indian Oil Mauritius Ltd (IOML). While IOML is also scouting for retail opportunities in Libya, Yemen, Oman, Turkmenistan and Azerbaijan, it has put its Indonesian retail plans on hold, citing regulatory issues.
“We are looking at places where the market has been de-regulated. Before extending our reach, we are waiting for things to stabilize,” said a senior IOC executive who did not wish to be identified.
Lanka IOC carries out retail marketing of petroleum products, supplies bulk quantities to industrial consumers, and builds and operates storage facilities at the Trincomalee tank farm in northeast Sri Lanka.
“We are adopting a cautious approach as even though the petroleum sector has been de-regulated, in an event of any spike in international oil prices, it is only the state-owned Ceylon Petroleum Corporation (CPC) that gets subsidies,” said the executive.
Lanka IOC at present has 161 outlets. Of this, 100 outlets were taken over by the company from CPC. The rest are dealer-owned franchisees.
CPC, the other important player in the petroleum sector, has 1,070 retail outlets.
“We will acquire the land and build them ourselves and then appoint dealers for them,” an IOC spokesperson said of the planned expansion.
Investment per outlet varies from Rs50 lakh to Rs2 crore, depending on the location.
However, industry analysts said that on account of subsidy and oil bonds given by theSri Lankan government to CPC, it has not been a posi-tive investment environment for IOC. They are also ofthe view that this investment is more for brand visibility than ramping up the retail infrastructure.
At present, the Sri Lankan petroleum market has a demand of 3.5 million tonnes per annum and a refining capacity of 2.2mtpa.