A year after the start of the Russia-Ukraine war, India’s fuel retailers are still shouldering the impact of high oil prices. While state-run retailers have been compensated by the government for not raising pump prices, private fuel retailers are incurring under-recoveries. Nitin Prasad, chairman of Shell Companies in India, tells Kalpana Pathak that despite challenges, the company will continue to operate its fuel stations and expand operations. Edited excerpts:
What is the under-recovery for Shell’s retail operations right now?
There are structural disadvantages for a company like Shell, which is an independent private market player. Pricing in all things is not just a function of your cost, recoveries and margins, but of what’s the quality of the product and services that you offer. There is a structural advantage for the PSUs. It can be logistics, infrastructure, accessibility to pipelines, ability to swap molecules and refining infrastructure. Those things are not necessarily available to a player like us … pricing is purely a function of our discovery process. I can tell you very clearly that it doesn’t generate enough returns for us at this point in time, but we will continue to operate our stations. Even last year we did not shut any of our stations.
Will Shell continue to expand retail operations?
We have 350-plus retail outlets across eight markets currently. We intend to expand our fuel retailing network to about 1,200 stations by 2029-30. We would have actually finished expanding by 2027 but due to Covid, we lost a couple of years. These (outlets) will be concentrated in the western region and the southern region where we find it to be competitive, from a logistics and infrastructure point of view. In fact, we have already installed EV (electric vehicle) chargers on our sites. We only started the business in Q4, and we are on track to deliver 10,000 EV charging points.
How do you marry your net-zero goals to growing fossil fuel retailing?
We have to take a position, not just on reducing our own emissions and our own assets but by building low-carbon businesses and growing a zero-carbon portfolio of solutions that’s available. We are building our fuel network and also adding 10,000 EV charging stations which will have 100% green energy because we have a renewable energy generation business. We have our power trading business, we do REC (renewable energy certificate) trading. We will also offer biofuels. As hydrogen mobility comes in, we will offer that, so our role will be to continue to offer the options to customers and they will make their own choices.
What is Shell doing in the biogas and bio-CNG business?
It’s early days in the bio-fuel space (and for us to) say which part of the space are we going to play. Do we see ourselves developing projects? Clearly. We have done a number (of them) in North America, we’ve done many in Europe. We see ourselves as being a developer in India also. But is that the only thing we’re going to do? Probably not, because we see a role for ourselves as being a tremendous marketer or a trader of bio and bio-components and bio-products and therefore we see that’s a great business for us to be a part of.
You signed an MoU with ONGC for CCUS. Any update?
I think it’s early days for the carbon capture, utilisation and sequestration (CCUS) business in the country, and the intention with the ONGC discussion is just to begin to understand what the subsurface quality is, to talk about storage or enhanced oil recovery, because it’s not necessarily true that all subsurface reservoirs can store CO2. We already have a lot of data and a lot of understanding. The intention is to put that into a report and see what the way forward is.