ONGC Aims To Complete HPCL Acquisition By March
ONGC hopes to complete its merger with HPCL by March next year.
The nation’s largest energy driller Oil & Natural Gas Corporation Ltd. hopes to complete the acquisition of state-run oil marketer Hindustan Petroleum Corporation Ltd. by March, chairman and managing director Shashi Shanker said today.
When the stake sale was announced in July, ONGC, one of the richest PSUs with a mount of cash, had pegged the cost of acquiring the 51.11 percent government stake for around Rs 32,000 crore, but since then the HPCL stock has rallied and there are fears that the oil and gas explorer will have to shell out much more than the initial estimate.
When completed, ONGC will become the first fully integrated state-run oil and gas company with significant upstream and downstream operations with many refineries and over 14,400 retail outlets.
On July 19, the Cabinet had approved the sale of its 51.11 percent in the third largest oil retailer and refiner to ONGC as part of its effort to create an integrated energy behemoth and also to meet the hefty Rs 72,500-crore selloff target it had budgeted for this fiscal.
When asked about the cost-escalation for the deal, Shanker said, “There is an impression that this acquisition decision was thrust on us. That’s not the case. It was announced by the finance minister in the Budget and then they consulted us on what we want. We chose HPCL after considering all the pros and cons. We are confident that we’ll be completing the deal before March end.” But he declined to quantify the payout to shareholders, saying that is still under evaluation.
Explaining why they chose HPCL over BPCL, he said, “We have around 15 million tonnes refinery in Mangalore Refinery & Petrochemcials, but we have no retail presence, while HCPL has huge retail presence with over 14,400 outlets, but does not have enough refining capacity. So there is a perfect business sense in choosing HCPL."
The ONGC chief declined to comment on the reported government move to monetise up to 60 percent of the oil and gas fields developed by it along with Oil India Ltd. to private parties, saying the company has not heard anything from the government.
The move comes as the oil ministry is unhappy with the near stagnant oil and gas production and believes giving out the discovered fields to private firms will help raise output as they can bring in technology and capital.
It hopes that the move may boost domestic output and help meet the Prime Minister's target of reducing fossil fuel imports by 10 percent by 2022. Currently, India is the world's third-largest crude importer and buys up to 80 percent of its supplies from overseas.
After the discovery of the Bombay High oil fields in 1974 and the Bassein gas fields in 1976, oil and gas behemoth ONGC has not been able to bring in any new major fields into production in the last three decades. India has failed to draw in global oil majors since 1990 despite easing fiscal terms. The only exceptions are Royal Dutch Shell and BP which bought stakes from firms that had won drilling rights.