More than half dozen private firms, including a few big business houses, are eying investment in the petroleum sector after the government issued the Petroleum and Gas Transaction (Regulatory) Orders.
Ending the state-owned Nepal Oil Corporation (NOC)’s 40-year monopoly, the new petroleum regulatory orders opened the door for the private sector in the petroleum business.
Eight private companies have approached the Department of Commerce and Supply Management (DoCSM), enquiring about the licence for importing petroleum products and setting up petroleum refinery.
DoCSM Director General Narayan Prasad Bidari said Vishal Group, Koshi Petrochemicals, Malika Petroleum, Chandi Lumbini Gas Storage Company, and Sipradi Trading have approached the department. “Although the companies have not formally applied for the license, they have requested to fast-track the license issuance process,” he said.
Nimbus Group has also expressed its interest in getting into the petroleum business. Nimbus Managing Director Anand Bagaria termed the government’s move “exciting”. “We are interested in doing petroleum business and are currently discussing with a few foreign companies for partnership,” said Bagaria. “One of the reasons why we entered into the LPG business was to get into petroleum sector.”
Nimbus Group had acquired Nepal Gas last year.
Vishal Group Director Anuj Agrawal said his company has already entered into an oil exploration strategy. “We are currently doing a feasibility and risk assessment,” Agrawal said, adding the company will devise a strategy to bring in foreign partners in the second phase.
The government had opened import, storage and distribution of petroleum products to the private sector in May 2008. But the private sector was not assured to invest in the sector due to the lack of proper legal and policy frameworks.
“Although private investment was allowed earlier, the government had not determined the standard, working areas and among other procedures,” Bidari said, adding now the orders have determined all legal and policy frameworks to run petroleum business.
The new regulation has determined all criteria for the private sector to be eligible for oil trading and processing. “We will ask private firms’ business plans for necessary observation after they drop their formal application at the department,” added Bidari.
The department will issue a preliminary permission within 90 days, according to Bidari. Firms getting the preliminary permission should assure adequate physical infrastructure and safety measures to the department within the next two years. An additional one year will be given, if they still do not meet the requirement. “A company will lose the permission and all the fees it has paid, if it fails to meet the requirement until the given deadline,” he said.
Private players said they need more clarity from the government. With the government providing subsidy to NOC, they said there has to be a level playing field. “We need more clarity from the government, especially on storage and subsidy issues,” said Bagaria.
Currently, Nepal imports petroleum products worth Rs 97 billion and fuel demand is growing at the rate of 20 percent annually, especially due increased load-shedding hours and development activities. Officials said the bright prospect of oil business is likely to attract a number of multinational companies as well.