Rosneft and Saudi Aramco are unlikely to bid in the privatisation of Indian refiner Bharat Petroleum Corp, sources familiar with the matter said, as low oil prices and weak demand curb their investment plans.
Russia's Rosneft had expressed an interest in buying the federal government's 53.29% stake in Bharat Petroleum (BPCL) when its chief executive Igor Sechin visited New Delhi in February, while India's trade minister has said that Saudi oil giant Aramco was enthusiastic about the stake sale.
A Rosneft source, however, said it will not buy BPCL, while another said the Russian oil major would only be interested in BPCL's marketing business, which is comprised of fuel depots and more than 16,800 fuel stations.
"For this, India has to sell BPCL in parts," the source said.
India's government, which is looking to finance welfare schemes and bridge a fiscal deficit that has already topped the annual target, had aimed to raise $8 billion to $10 billion through the sale of its stake in BPCL.
But BPCL's share price has plunged by nearly 30% over the past year to trade at about 386 rupees on Tuesday.
"This is not the time to invest in refining ... demand would be there for oil to chemicals and not conventional products," one of the sources familiar with Aramco's thinking said.
Rosneft and India's finance ministry did not respond to requests for comment.
"We continue to explore potential growth opportunities in Asia, including India, and will make appropriate updates as and when necessary," Aramco said, declining further comment.
The Saudi government discussed BPCL's privatisation with an Indian oil ministry official in July, an oil ministry document showed.
However, a second source familiar with Aramco's thinking said that after initially showing interest Aramco had not submitted a formal expression of interest (EoI), even though the process was extended by two months to Sept. 30.
A third source said that Aramco has halted most of its India investment plans because of the oil price and is unlikely to bid for BPCL.
"India will not get the deserved price for the BPCL stake sale in the current environment," a fourth source familiar with Aramco's thinking said.
This means India may have to pursue other avenues to raise funds to meet its spending commitments, Kiran Jadhav, who runs his own asset management firm with a 2 billion rupee ($27 million) portfolio, said.
"If big firms are backing out, this will definitely hurt the share price and valuation of BPCL," he said.
Sources said that neither Rosneft nor Aramco see much value in refining because the government in the Indian state of Kerala, home to BPCL's biggest refinery, might challenge the privatisation in court and BPCL's two other refineries are in cities, leaving little scope for revamps and expansion.
Reuters reported last week that India's efforts to privatise BPCL could spill into the next fiscal year, citing a government document and sources.
"Aramco has not participated in the EoI so far. Initially we had expected them to show interest. We are weighing our options," a source familiar with India's stake sale programme said.