Reliance and BP last week announced further details of their retail fuel partnership, in which the British firm has taken 49 per cent stake for USD 1 billion.
The tie-up will see RIL's 1,400 existing pump stations being ramped up to 5,500 over five years. It also will increase the lucrative aviation fuel stations from 30 to 45.
"Targeted fuel station additions would be nearly equivalent to two-thirds of annual station additions by (state-owned) oil marketing companies (OMCs)," it said. "This should also help RIL sell more refined products domestically as refinery export restrictions ease."
Retail network will be under the Jio-BP brand and will cater to mobility solutions that may leverage BP's electric charging technologies and RIL's digital ecosystem.
"We have currently seen limited plans by OMCs on this front, however current regulations on the setup of electric charging infrastructure favour OMCs considering their reach."
RIL and BP expect to form their partnership by first half of 2020 and it will include convenience stores and Castrol lubricants.
Morgan Stanley said the overall increased competition in domestic fuel markets would re-rate multiples as fuel pricing gets delinked from government intervention.
"Also, contrary to the market's belief that retail fuel margins will weaken due to competition, we believe they can expand over the medium term towards regional averages, which are 1.5-2x higher than in India," it said. "If the RIL-BP venture hits its target for fuel stations, it would account for nearly 8 per cent of pump stations by 2025. We see an impact on OMCs' market share both in aviation and auto fuels."
It believed that market leader Indian Oil Corp (IOC) could be impacted the most, as seen over the past decade when its retail fuel market share declined by 10 percentage points (to below 40 per cent) in favour of private players.
"Bharat Petroleum Corp Ltd (BPCL), which has the highest exposure to highways, could see more aggressive pricing as RIL-BP would target these areas where throughput per outlet is higher," it said. "We see limited impact to HPCL considering its higher exposure to cities, which are normally tougher for new players to enter considering long-term leases even for dealer-operated stations."
However, both BPCL and HPCL have tried to protect market share in the past and they are seen keeping that stable going ahead.
In August, RIL had said BP will pay about Rs 7,000 crore for acquiring 49 per cent stake in its existing petrol pumps and aviation turbine fuel network. RIL will hold the remaining 51 per cent interest.
This is the third joint venture between Reliance and BP since 2011.
BP had in 2011 bought 30 per cent stake in 21 oil and gas exploration and production blocks of Reliance for USD 7.2 billion. At that time, another 50:50 joint venture, India Gas Solutions, was set up for sourcing and marketing gas in India.
The country currently has 66,408 petrol pumps, with public sector retailers owning 59,831. PSU retailers have plans to double this network and have already starting appointing dealers.
Russia's Rosneft-backed Nayara Energy, formerly Essar Oil, has 5,453 petrol pumps and has plans to scale them up to more than 7,000 in two-three years.
Royal Dutch Shell has 167 outlets and is slated to add 150-200 more petrol pumps.
BP had in 2016 received a licence from the government to set up 3,500 petrol pumps in India but it did not move on that authorisation.
French energy giant Total SA too is keen on entering the Indian retail market and has tied up with Adani Group for the same. ANZ ABM ABM