International oil and gas giant Royal Dutch Shell is all set to foray into distribution of Aviation Turbine Fuel, fuel for airplanes.
Royal Dutch Shell would be the first international major to enter into ATF marketing space. Besides national marketing companies (IOC, HPCL and BPCL), Reliance Industries, ONGC and Essar also plan to take a plunge in jet fuel distribution.
Royal Dutch Shell, which has made over $1 billion investment in the oil and gas sector, has already secured the marketing licence from the government. The company is looking at greenfield airports, including Navi Mumbai Airport and other new projects.
"Shell is finalising the modalities of its entry into ATF distribution. Shell is exploring the option of a joint venture partnership in India or going solo," sources close to the development said.
Deepak Mukherji, country head of corporate affairs of Shell India, said the group had secured the marketing licence, adding: "ATF distribution is an exciting segment that we are keen on." However, Mukherji declined to divulge the details.
Industry experts said the entry of international giants would mean the availability of jet fuel at lower prices for domestic airlines. "The price of ATF will go down by 15 to 20 per cent with global giants entering this space, which was the monopoly of the three state-owned oil marketing companies. However, these private players could not supply jet fuel as they were not alloted space by Airport Authority of India," they added.
A senior Jet Airways executive said the entry of private players and international players will bring down the cost of ATF and these players are expected to set up a common user facility where an airline can access fuel of any private player at a fixed point.
ATF is a major cost component for airlines in India , as it accounts for about 40 per cent of the operating cost of the domestic carriers. The estimated annual fuel bill for the industry is around $1.7 billion, based on September 2006 rates.
According to Federation of Indian Airlines, a platform for domestic carriers, the ATF price in India is Rs 37,800 per kilolitre against the international price of Rs 21,800 per kilolitre, which is about 73 per cent higher at April 2007 prices.