MUMBAI, March 19: Hindustan Petroleum Corporation Ltd (HPCL) is believed to have signed an agreement with Esso Mauritius for marketing the latter's range of lubricating oils here. Esso Mauritius is the affiliate of Exxon Corporation of the US and has recently received approval from the Foreign Investment Promotion Board (FIPB) to set up a 100 per cent subsidiary in India.According to top industry sources, as per the agreement, Esso's lubes will be vended at HPCL's 4,500-and-odd retail outlets. These will be "non-competing" brands so that there is no scope of cannibalisation.
The other Esso brands will be sold through its own bazaar trade, for which the company is reportedly working on building an extensive distribution network. Thus, sources add, this separate route will ensure that there was no conflict of interests between the two parties. It will also give some of the Esso brands a tremendous degree of visibility in HPCL's retail outlets.
Esso will source its base oil from HPCL, which wouldtranslate into an immediate benefit for the domestic refining company. The agreement is different from the previous one wherein HPCL was to buy technology knowhow from Esso. The corporation would blend the lubes and pay a technology-transfer fee apart from royalty for selling Esso's lubes at its retail outlets. All profits from sale would accrue to HPCL.
The new agreement will work to HPCL's advantage as it would be the sole supplier of base-oil for Esso. The corporation will also be able to specify competitive price rates of base-oil at which Esso would buy. There is no indication where Esso will have its blending requirements met this time round, though sources say the company will have a range of options available from different manufacturers.
Whether the new marketing agreement will translate into an equity tie-up in the future remains to be seen, though observers say this is unlikely. HPCL has indicated in its recent annual report that it is exploring the possibilties of a joint venture with Esso forbulk liqueifed-petroleum gas (LPG).Part of HPCL's intital public offering was to expand its lube-stock capacity to 0.34 million tonnes from 0.23 million tonnes.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
