New Delhi: The Planning Commission has suggested that state-owned oil companies looking to buy overseas hydrocarbon assets tie up with private firms to avoid delays in decision-making, a top official said.
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“If a PSU (public sector unit) goes around buying assets, there are two issues: slowness in the decision-making process and whether these decisions have strong economic basis...there are concerns,” Kirit Parikh, member, energy, Planning Commission, told a conference here.
“A better way would be to go in participation with the private sector so there will be more due diligence...the best way is to structure a mechanism to secure assets overseas,” he said.
Developing economies such as India and China are in a race to acquire equity stakes in hydrocarbon blocks abroad. India has on many occasions lost out in bids to China in countries such as Kazakhstan, Nigeria, Angola and Myanmar.
Public-sector firms such as ONGC Videsh Ltd, the overseas arm of public-sector explorer ONGC Ltd, and Oil India Ltd want to buy assets abroad. OVL has a presence in 18 countries and a target to acquire 20 million tonnes per annum of hydrocarbon assets overseas by 2020. ONGC has also partnered with Mittal Investments Sarl, one of the investment arms of Lakshmi N. Mittal family, in acquiring properties overseas through ONGC-Mittal Energy Ltd, or Omel.
ONGC Videsh last year acquired UK-based Imperial Energy Corp. Plc. for $2.6 billion, triggering debate about the economics of the deal as crude oil prices crashed after it. The buyout marked its first big-ticket investment in the era of high oil prices.
While Radhe Shyam Sharma, chairman and managing director, ONGC, declined to comment on the issue, ONGC Videsh’s chairman R.S. Butola didn’t respond to phone calls or to a message left on his cell phone. N.M. Borah, chairman and managing director, Oil India, didn’t respond to phone calls or to a message left on his cellphone.
Acquisition strategy: Planning Commission member Kirit Parikh. Ramesh Pathania / Mint
The government has set up an energy cell in the ministry of external affairs to support state-owned energy firms’ expansion overseas, that will also help private companies such as Reliance Industries Ltd and Essar Oil Ltd, among others, in tapping energy resources overseas.
Virendra Gupta, additional secretary, ministry of external affairs, who heads this cell, said: “The capacities of public sector companies are limited. Our requirements are so huge that public sector alone can not meet them.”
Due to unfavourable demand-supply hydrocarbon balance in the country, acquiring equity oil and gas assets overseas is an important part of India’s plan to achieve energy security with the Union government encouraging national oil firms to aggressively pursue such opportunities.
Vijay Dharia, senior vice-president, Essar Oil, said: “It (buying hydrocarbon assets abroad) is a very valid issue.”
A Mumbai-based analyst, who didn’t want to be named, said: “Forming such partnerships (with the private sector) will help the PSUs in making faster progress in development and monetization of assets.”