Oil firms told to plan for mega merger, says oil minister Dharmendra Pradhan
Proposed merger of upstream and downstream firms is in national interest, will complement each other in different economic cycles, says oil minister Pradhan
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New Delhi: In a move towards integrating state-owned oil firms, the government has asked the firms to come up with a detailed plan for creating one or more large entities capable of withstanding oil price shocks, oil minister Dharmendra Pradhan said on Friday.
Speaking after launching a social media-based grievance redressal system for oil- and gas-related services, Pradhan said the proposed merger of upstream (exploration and production) and downstream (refining and retailing) companies was in national interest and has been conveyed to the firms.
“The entities getting integrated will complement each other in different economic cycles. The nitty gritty of the process will be decided by the companies,” Pradhan said.
According to a government official privy to the talks on the issue, state-owned explorer Oil and Natural Gas Corp. Ltd (ONGC) and refiner Hindustan Petroleum Corp. Ltd (HPCL) are candidates for a merger. The official didn’t want to be named.
ONGC’s director (finance), A.K. Srinivasan, denied knowledge of any proposal for the company’s merger with HPCL.
HPCL’s chairman and managing director M.K.Surana had declined to comment on this issue when contacted by Mint on an earlier occasion.
Once the companies submit their reports, the oil ministry and the department of investment and public asset management (DIPAM) will take the proposal forward.
The implementation of the proposal for the creation of an “oil major”, announced by finance minister Arun Jaitley in his 2017-18 budget speech, is being monitored at the highest level in the government.
A parliamentary panel, which tabled its report in both the Houses on 17 March, welcomed the move but advised caution in the process to be adopted.
“The creation of an oil major could have beneficial impact on the domestic petroleum scenario and immensely improve the competitiveness of oil PSUs (public sector units) on the global stage. The committee, however, feels that the government needs to proceed with caution as there are several challenges such as integration of human resources, creating synergies in companies having diverse operations, etc.,” said the committee on petroleum and natural gas chaired by Pralhad Joshi, a BJP MP from Karnataka.
The government is exploring the possibility of joining a club of other Asian nations in order to be able to better negotiate the price of its liquified natural gas (LNG) imports.
Pradhan indicated the possibility of joining China, Japan and Korea to jointly buy LNG.
The minister said that the market for LNG is becoming consumer-centric.