by admin | May 25, 2021 | Business, Corporate, Corporate Governance, Economy, Large Enterprise, News, Politics
By Sandip Sen,
New Delhi : ONGC will buy 51.1 per cent of the government’s equity in HPCL for Rs 36,915 crore ($581 billion) to stem the fiscal deficit and boost disinvestment — a year after the Modi government mooted a much-needed initiative to create an integrated supply chain in the oil sector. The government will exceed its 2017-18 disinvestment target by Rs 20,000 crore after the “strategic sale”.
Oil and Natural Gas Corporation Ltd (ONGC) Chairman Shashi Shankar confirmed that it will use debt, cash reserves and proceeds from sales of its stake in IOC and GAIL to fund the Hindustan Petroleum Corporation Ltd, India (HPCL) acquisition. It owns 13.77 percent stake in Indian Oil and 4.86 per cent in GAIL that is worth an estimated Rs 30,000 crore.
This could be followed by the acquisition of Mangalore Refinery and Petrochemicals Limited (MRPL) by HPCL (HPCL currently holds 16.96 per cent equity of MRPL). Chairman Shankar said: “That is a logical step. We see an advantage in that but cannot give a time frame.” The merger will help in creating the first of the two fully-integrated oil and gas producers that India needs to create, so as to improve supply chain efficiency.
For a nation that still relies on imports for over 80 per cent of its oil and gas, India lacks a comprehensive energy strategy that costs it billions of dollars each year. Both the earlier United P{rogressive Alliance (UPA) and the current National Democratic Alliance (NDA) governments have previously failed to realise that the 30 largest oil-consuming nations have invested significantly in the integrated supply chain to improve efficiency and reduce costs. India fails to do that math despite repeated prodding by the International Energy Agency (IEA).
The talk of an integrated supply chain is not new. The proposal to integrate oil companies first came up in 2004 under the UPA. “It was then struck down by an expert committee, Sushil Chandra Tripathi, a former Petroleum Secretary, told this correspondent during a discussion on Lok Sabha TV last year.
“In the Western world we have Exxon Mobil, Shell, BP and Total; in Russia we have Rosneft and Gasprom, in Saudi Arabia we have Aramco and in China we have Sinopec. They are all large, integrated oil majors very unlike Indian companies,” Tripathi added.
India has six separate entities, all very small by comparison: ONGC the oil producer, GAIL the gas producer, MRPL a refiner, and IndianOil Corporation Ltd (IOC), HPCL and BPCL that are refining and marketing companies. Strangely, the integrated supply chain concept does not exist in the Indian subcontinent. After the ONGC-HPCL merger, the integrated supply chain created by ONGC as a producer could add both “supply planning”, including crude buying, storage and refining, as well as “distribution planning” that would have networked pipelines, transport and marketing infrastructure, and sales outlets like petrol pumps for retailing all petroleum products.
There are two major advantages of having integrated supply chains. Oil is an intensely volatile commodity. The production price of oil or gas is fairly high for Indian companies when compared to that of Saudi Arabia, Kuwait, Iran, Russia or the US. When crude prices are low, integrated oil companies import heavily. When international prices are high they raise their domestic production. This gives them better control over their profits — which are high for the marketing arm when international prices drop and high for the producing unit when the prices surge.
Besides, the size of the company matters, as oil is a capital intensive industry. While the IEA recommends 90 days oil storage to stem crude oil volatility, India has just around 15 days storage capacity, mostly developed by the marketing and refinery units. When ONGC, with a net worth of Rs 221,900 crore, takes over HPCL (net worth Rs 21,070 crore) it automatically gives the latter fiscal muscle to improve its storage and pipeline capacities.
So, though the current acquisition is primarily to meet the government’s disinvestment target, the process should be taken forward to ensure that India has two major integrated oil and gas majors — the other one would be GAIL-IOC-BPCL — that can compete on a global scale.
(Sandip Sen is a senior journalist who writes on economic affairs. He can be contacted at sen.sandip@gmail.com )
—IANS
by admin | May 25, 2021 | Business, Commodities, Commodities News, Corporate, Corporate finance, Corporate Governance, Economy, Finance, Large Enterprise, Markets, News, SMEs
New Delhi : Oil and gas explorer ONGC on Sunday said that “all options” including internal accruals and short-term borrowing are available to fund its acquisition of HPCL.
“We have various options available with us to fund this deal,” Shashi Shanker, Chairman and Managing Director of ONGC, told a press briefing here, a day after the central government entered into an agreement with the oil and gas explorer for strategic sale of its equity share-holding in HPCL.
“There is an option of internal accruals… another option is of short-term borrowing and liquid assets… We will exercise the most beneficial option available with us.”
According to Shanker, acquisition of the Central government’s 51 per cent stake in HPCL worth over Rs 36,900 crore can also be done through the combination of various options available with ONGC.
“We have internal resources available with us which is around Rs 13,000 crore. We also have large shareholding in IOC (IndianOil) and GAIL and we can also borrow,” Shanker said.
He pointed out that the acquisition is a “perfect fit” for ONGC as it will protect the oil and gas explorer against the volatility in crude oil prices.
“Whenever crude oil prices go up — the bottomlines and the toplines — of companies like ONGC improve and that of refiners like HPCL get impacted,” Shanker said when asked about the synergies that the acquisition is expected to bring.
“… And when crude oil prices fall — then the GRMs (gross refining margins) of refiners — like HPCL improve and the bottomlines and the toplines of companies like ONGC get impacted. Thus this acquisition is a perfect fit… It will also enhance the value for minority shareholders.”
—IANS
by admin | May 25, 2021 | Economy, News
Aizawl/Agartala : (IANS) State-run Oil and Natural Gas Corporation (ONGC) has struck gas in northern Mizoram and is continuing prospecting for more hydrocarbons, a minister said on Thursday.
“The ONGC has for the first time found gas in Assam-Mizoram bordering areas under Kolasib district,” Mizoram’s Industries Minister H. Rohluna told the assembly in Aizawl.
“The ONGC is now conducting tests on the gas found. The company has continued its drilling and hydro-fracturing to find out whether more deposits of hydrocarbons are available in the area,” Rohluna said.
The company’s Jorhat basin has been doing exploratory drilling in Kolasib district in northern Mizoram.
ONGC has already found large reserves of natural gas in Assam and Tripura, a company spokesperson said.
Oil India Ltd, another company owned by the central government, has also found gas in Assam and Arunachal Pradesh.
ONGC, which has been present in Tripura since 1972, has so far drilled about 206 wells in the state half of which are gas bearing.
The ONGC spokesperson said the company has undertaken a Rs.5,050 crore ambitious plan to prospect for more gas in Tripura.
ONGC has also commissioned its first mega commercial power project in the state, run by the ONGC Tripura Power Company (OTPC).
The Rs.10,000 crore 726 MW capacity gas-based thermal power project (using both water and natural gas) at Palatana, 60 km from here, is ONGC’s first commercial power project in India.
ONGC, in association with Chambal Fertilisers and Chemicals Ltd and the Tripura government, would also set up a Rs.5,000 crore fertiliser plant in northern Tripura.
“The process is on to set up the fertiliser plant,” said another ONGC official.
by admin | May 25, 2021 | Muslim World
New Delhi : (IANS) India and Bangladesh have signed a memorandum of understanding to construct a pipeline for supply of high speed diesel, it was announced on Thursday.
“Numaligarh Refinery Limited (NRL) and Bangladesh Petroleum Corporation (BPC) are working on details for the envisaged project of supply of high speed diesel (HSD) from Numaligarh (in Assam) to Parbatipur in Bangladesh for a period of 20 years under a JV project between NRL and BPC,” external affairs ministry spokesman Vikas Swarup said at a media briefing here.
“The product will be transported through a pipeline of approximately 135 km of which 130 km will be in Bangladesh and five km in India,” he said.
The pipeline will run from Siliguri in West Bengal to Parbatipur in Bangladesh.
Swarup said, as a goodwill gesture, an initial consignment of 2,200 tonnes of diesel would be transported from Siliguri to Parbatipur by 50 wagons of the Indian Railways.
“This train will be flagged off from Siliguri on March 17 by Minister of State for Petroleum and Natural Gas, Dharmendra Pradhan,” he said.
The decision to construct the pipeline was taken during Prime Minister Narendra Modi’s visit to Dhaka in June 2015.
by admin | May 25, 2021 | Business
New Delhi:(IANS) State-run explorer Oil and Natural Gas Corp (ONGC) said on Tuesday that in order to best benefit from low exploration costs resulting from falling international oil prices, the focus should be on exploration in frontier and deep water blocks where the lead period is 7 to 8 years.
“This is a time for reserves-building in areas where the lead time is more than 7-8 years and incentivizing exploration activities in frontier and deep water areas,” said ONGC’s executive director, exploration, Anand Sahu at the India Energy Forum and Observer Research Foundation-organised Petro India Conference.
“If focus is laid on extensive data acquisition in the unexplored sedimentary basins during the period of global low exploration costs, reserves that will be accreted can be profitably harnessed during the next cycle of boom.
“The investment levels over the next several years in the oil sector will be significantly lower than the previous 10 year annual average in view of fall in oil prices and relationship between oil prices and upstream investment,” he added.
Noting that nearly all the major oil and gas companies have reduced their capital investment budgets for 2015 and are delaying new projects, Sahu said that with oil prices having plunged to below $30 a barrel levels, the capital available for exploring new basins is tightening, which makes it a daunting task for India to reverse the investment trends in upstream sector.
In this connection, he also said that the government has allowed exploration of shale gas and shale oil by ONGC and Oil India.