Royal Dutch/Shell, the world's third largest oil and gas group, has sought waiver of the Rs 500 crore (Rs 5 billion) bank guarantee norm for grant of licence to sell petrol and diesel.

Oil retail licence is conditional to firms investing a minimum of Rs 2,000 crore (Rs 20 billion) in oil infrastructure, failing which they are supposed to furnish a Rs 500 crore bank guarantee.

Shell, in its application to petroleum ministry for grant of marketing licence to retail petrol and diesel from 2,000 petrol stations, has promised to cross the investment threshold by the end of 2003, but has ‘ignored' the bank guarantee clause, government sources said.

"Company officials have orally requested for waiver of the bank guarantee clause," they said, adding that the petroleum ministry, which is doubling up as oil sector regulator, has asked Shell to clarify its stand on the issue.

Sources said the firm has stated in its application that it had invested Rs 165 crore (Rs 1.65 billion) in oil exploration, Rs 153 crore (Rs 1.53 billion) in lubricants blending and LPG facilities and has proposed to invest Rs 2,625 crore (Rs 26.25 billion) on an LNG terminal at Hazira in Gujarat.

"The marketing guidelines are clear. We will verify the investment made by the company and any shortfall in threshold limit would have to be made good by furnishing a bank guarantee," they said.

Shell has also been asked to furnish details of petrol stations it plans to set up in remote and low service areas.

As per norms, 11.6 per cent of the total retail strength has to be put up in remote and low service areas, sources said while indicating that there would be no relaxation in the criteria.

Shell, which has also bid for acquiring the government's stake in state oil refiner Hindustan Petroleum Corporation Ltd, has indicated that it would source petrol and diesel from domestic refiners for its retail network.

"We have initiated dialogue with Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd in this regard," the company said in its application, giving enough indication that it would resort to imports if products supplies are not secured from domestic refiners.

Shell, which operates more than 46,000 petrol stations and has interests in about 50 refineries worldwide, may import petrol and diesel at its Hazira port in Gujarat from its 430,000 barrels per day Bukom refinery in Singapore or its surplus refinery in Thailand.

Some 90 per cent of Bukom's products are exported in the region and beyond.

The Export and Import Policy for 2003-04, had on Monday, freed import of petroleum products for companies holding a valid marketing licence.

Sources said Shell plans to use distribution network of incumbent oil firms like Indian Oil Corporation, BPCL and HPCL ‘rather than duplicate facilities.'

The company expects to sell up to 1.4 million kilolitres of petrol and diesel within the medium term through its proposed retail network, they added.

After deregulation of oil sector last year, the government had authorised Reliance Industries to set up 5849 retail outlets, Essar Oil 1700, state-owned Oil and Natural Gas Corporation 600 and Numaligarh Refinery Ltd another 310 outlets.