ONGC likely to buy out government’s entire holding in HPCL: Report

THE Department of Investment and Public Asset Management (DIPAM) will seek cabinet approval for Oil and Natural Gas Corp (ONGC) to buy the government’s entire stake in refiner Hindustan Petroleum Corp Ltd (HPCL) in line with the oil ministry’s proposal of creating a domestic oil giant, says a report appeared in a national financial daily.
The move is based on the recommendations of consultancy Deloitte, which the oil...
ministry had hired to suggest ways of restructuring state firms. The ministry has left it to the department of investment to decide on how the divestment in HPCL should be achieved, although it’s suggested the refiner be retained as a separate unit of ONGC, and not merged with it.
“The divestment of HPCL stake will help government generate resources that could be deployed for social welfare,” said one of the persons cited above.
An ONGC-HPCL combine will, however, be much smaller than global giants such as ExxonMobil ($340 billion), Shell ($222 billion), Total ($128 billion) or BP ($120 billion).
The Union Budget had proposed the creation of an integrated public sector ‘oil major’ through consolidation that would match global rivals.
The Budget announcement had fuelled speculation that state oil firms may be radically reorganised into fewer units with each having a presence in both upstream and downstream segments. Currently, there is no other proposal for reorganising state firms, barring ONGC’s proposed acquisition of HPCL, sources said.
It was first in February 28 that the story about government’s plan to sell its stake in HPCL to ONGC hit the headlines.
The acquisition of HPCL would make ONGC, an exploration and development company that produces 60% of country’s crude oil, a much more integrated player with a large presence in the downstream segment. ONGC already has a presence in the refining sector with its subsidiary MRPL operating a 15 million tonne plant in Mangalore that it plans to expand to 25 million tonnes.
HPCL operates 16 million tonnes of refining capacity and another 9 million tonnes through a joint venture. Indian Oil is leading domestic refiner with 80 million tonnes of capacity.
The acquisition would also give ONGC control over HPCL’s 14,500 filling stations, about a quarter of the domestic transport fuel market. ONGC’s subsidiary MRPL too has licences to operate petrol pumps but hasn’t been able to make much headway so far. The Government owns 60.07 percent stake in ONGC, whereas its total stake in HPCL is 51.11 percent
HPCL is a Navratna oil marketing PSU and a Forbes 2000 and Global Fortune 500 company. The blue chip PSU HPCL owns and operates two major refineries producing a wide variety of petroleum fuels and specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum (MMTPA) capacity and the other in Visakhapatnam, (East Coast) with a capacity of 8.3 MMTPA. HPCL also owns and operates the largest lube refinery in the country producing lube base oils of international standards, with a capacity of 428 TMT. Presently, HPCL produces over over 300 grades of lubes, specialities and greases.