New Delhi: Steel tycoon Lakshmi N Mittal’s acquisition of 49% stake in Hindustan Petroleum’s $3 billion (Rs13,086 crore) Bhatinda refinery has violated his pact with Oil and Natural Gas Corp to pursue hydrocarbon opportunities exclusively with the flagship Indian firm, an ONGC official said.
Though Mittal inked a joint venture agreement in July 2005 with the state-run firm to form ONGC-Mittal Energy Ltd (OMEL) for acquisition of oil and gas fields, refinery business and LNG projects but the steel czar recently decided to go it alone in investing Rs 3,300 crore in the Bhatinda refinery.
Besides, Mittal has on his own bought 50% stake in a Kazakhstan oil firm from Russia’s Lukoil for $980 million and acquired 3% stake in the $6 billion Chevron-operated Olokola LNG (OK-LNG) project in Nigeria.
“The 24 July, 2005 agreement had earmarked 27 countries for exclusive pursuit of hydrocarbon opportunities by OMEL. For the rest of the world, it clearly stated that Mittal shall offer ONGC Videsh Ltd (OVL) a partnership in any venture or business opportunity it wishes to undertake in the hydrocarbon sphere,” said the ONGC official.
But there was no such restriction placed on ONGC, he said, adding Nigeria and Kazakhstan fall under the 27 exclusive countries marked for OMEL.
Clause 2.4 of the 2005 agreement reads, “In the event Mittal or any of its affiliates is desirous of undertaking any venture or business opportunity in the hydrocarbons business in areas other than the Territories (27 countries), Mittal shall invite OVL, to the extent permissible, to participate in such venture or business opportunity together with Mittal.”
The agreement had classified target countries into Schedule-I and II. Mittal and ONGC had agreed to participate on an exclusive basis through OMEL in the Schedule-I countries of Angola, Azerbaijan, Congo Brazzaville, Democratic Republic of Congo, Indonesia, Kazakhstan, Romania, Trinidad and Tobago, Turkmenistan and Uzbekistan, the official said.
In the Schedule-II countries of Bosnia, Canada, China, Czech Republic, France, Germany, Kyrgyzstan, Liberia, Macedonia, Mexico, Nigeria, Poland, Sao Tome and Principe, South Africa, Sudan, United Kingdom and the US, the two agreed to bid jointly on a case-to-case basis, he said.
For Schedule-I countries, the agreement provided that OVL could bid alone for any project if it could not reach an agreement on the terms of a joint bid with Mittal.
“Mittal in such circumstances shall not make any competing bid or other engagement process for the project,” Clause 2.2.2 of the agreement read.
The official, however, did not say what action ONGC could take in event of non-compliance with the agreement.