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ONGC may bid for HPCL, BPCL

Sambit Saha & Pradeep Gooptu

Oil and Natural Gas Corporation, the state-owned oil exploration behemoth, may bid for Hindustan Petroleum Co Ltd and Bharat Petroleum Co Ltd to realise its dream of becoming a global oil major with interests in exploration, production, refining and retailing.

Subir Raha, chairman and managing director, ONGC, said: "We may bid for BPCL and HPCL provided the conditionalities put forward by the government suits us. We would closely go through proposed shareholder's agreement for each company before deciding on the course of action."

Raha said ONGC would like to concentrate on exploration and production in India and abroad in the next five years but the company needed to vertically integrate to remain competitive in the post-APM era.

"To be a global company, one has to be present in every cycle of business, be it E&P, refining or petrochemicals. This way one can offset the impact of downward cycle in one sector with presence in the other. This is a global trend and ONGC would like to follow that," Raha added.

However, it is not clear whether ONGC would be allowed to bid for BPCL and HPCL.

The government is yet to take a final call on whether one PSU acquiring another PSU is an effective divestment.

The issue cropped up after Indian Oil Corporation successfully acquired IBP in February this year.

GoI had initiated the process of divestment of BPCL and HPCL which own 40 per cent retail marketing share of the country, by inviting bid for global advisor. The process is expected to wrap up within this fiscal.

GoI holds 51.01 per cent stake in HPCL and 66.2 per cent stake in BPCL. It is yet unclear how much share government would shed in first tranche.

The chairman informed that ONGC might support IOC if it gets Indian Petrochemical Corporation Ltd for which price bid have been submitted by Reliance, Nirma and IOC.

"We may part finance the acquisition cost of IPCL. However, nothing has been decided yet. We are interested in IPCL because of synergy in business as ONGC supplies feedstock to IPCL's two gas-based plant at Gandhar and Nagothane," Raha said.

This would give ONGC access to 21 per cent polymer market share in country. He, however, added that it would not be pitching for Haldia Petrochemicals Ltd as there was no synergy in business.

ONGC is sitting on a huge reserve of Rs 284.71 billion and funding acquisitions can be done by internal accruals. Total income at the end of 2000-01 stood at Rs 250.87 billion and net profit Rs 52.29 billion.

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