By R. Sasankan

India is a fast-growing economy even if it cannot claim any longer to be at the head of pack. It is the third-largest importer of crude oil and, therefore, has enormous influence in the international oil market. It also ranks among the leading importers of LNG and LPG – and its petroleum minister, Dharmendra Pradhan, is a well-known figure.

With so many positives, one might have thought that the Department of Investment and Public Asset Management could have managed the strategic sale of Bharat Petroleum Corporation Ltd (BPCL) without having to undertake road shows in international cities like London, Dubai or Houston. BPCL, India’s second-largest oil marketing PSU, after all is not an unknown company.

What prompted this piece is my experience with India’s petroleum sector which I have been covering since the early 1980s, starting with my days in The Economic Times. So, here is my honest take on road shows: most of them are elaborate junkets and have produced very poor results. The road shows of Indian oil companies are stage-managed affairs, and usually choreographed failures.

India’s oil companies started regular road shows in the 1990s when it first started to seek bids for oil and gas exploration acreage. The usual destinations were Singapore, London and Houston. The brains behind the road shows are bureaucrats and senior executives of upstream major Oil and Natural Gas Commission (ONGC). The minister is usually persuaded to head the team.

There have been nine rounds of bidding under the New Exploration Licensing Policy (NELP) – all of which organised road shows at these locations. Normally, one would expect that there would be an assessment of outcomes after each road show to understand how successful they have been in terms of attracting bids from E&P companies. Strangely, I haven’t come across any such assessment either by ONGC or the ministry.

The NELP rounds failed to attract the oil majors. During the pre-NELP rounds of bidding, there were a couple of giants like Chevron and Texaco that evinced interest and went on to drill one or two wildcat wells. But the NELP rounds were an outright disaster: these road shows failed to snare even the mid-sized companies.

The road shows were a craze back in those days among bureaucrats and top company executives. It was an opportunity for them to go on expense-paid foreign trips to destinations that they otherwise might never have been able to visit. Back then, India had scarce foreign exchange reserves and it was very hard to get approvals for the release of dollars under a very restrictive regime on capital outflows. International service contractors operating in India used to ensure that a crowd of executives turned up at each of the road show venues and the Indian embassies at these locations also tried hard to drum up interest.

But no one actually looked closely at the people who were turning up for these events. Dr Bhamy Shenoy, a US-based oil expert, who has worked with multinational oil companies overseas, has an interesting story to relate about these Indian road shows. “I attended one such event in Houston. It was a disappointment. When I learnt that the petroleum ministry was going to hold a road show, I wanted to meet the Indian delegation to share my experience of working in a large multinational corporation. I was strategic planning manager working in the chairman’s office where I was in charge of assessing multi-billion capital projects. However, Indian delegation did not show any interest in wanting to meet me. I had also invited my friend who worked for an engineering construction company with considerable experience in the oil sector at managerial level. Our only purpose to meet the delegation was to help them while making a presentation to the attendees. We had no personal agenda. But the delegation headed by a senior IAS officer was not interested. Unfortunately, the road show was a flop. None of the top or mid -level executives who are likely to influence the decision attended the meeting. Those who attended were junior-level technical people with no access to the top management.”

Clearly, this is a shame. What is the use of holding such road shows if they fail to attract an oil major or even a mid-sized company? Remember, that even BP entered India’s E&P space as Reliance Industries’ partner and not through the bidding process for exploration acreage. It is high time that we halt these expensive, purposeless road shows for oil exploration blocks.

Road shows can be useful if undertaken seriously and with thorough preparation. Look at the way that Aramco went about aggressively marketing its initial public offering (IPO) of shares. Those behind the Aramco IPO had done a lot of planning, identified the investors who should be approached and determined what sort of “pressure” should be applied to bring them on board. Result: the Aramco IPO was a grand success.

Pradhan is very receptive to ideas. It is high time that he undertakes a review of the outcomes of such road shows before permitting any new ones in the future.

What provoked me to write this piece on ineffectual road shows is the fact that the government is aggressively pursuing a strategy to sell its stake in BPCL. Instead of road shows, it would be best to mail the information memorandum to all investment bankers/advisers and the oil majors and invite them to a pre-bid conference in Delhi or Mumbai. That would be far more effective, meaningful and would cost little. Those truly interested in bidding for BPCL could also use the opportunity to visit some of its facilities. This approach would be far more meaningful and make competition far more transparent, leading to a fair and, hopefully, better valuation.