Update: ONGC has rethinking on joint venture with Hinduja group

Mumbai: Oil & Natural Gas Corporation Ltd (ONGC) which signed a memorandum of understanding (MoU) with the Hinduja group on November 7 to form joint ventures to pursue global opportunities in liquefied natural gas (LNG) and linked E&P business is resisting joint acquisition of oil fields abroad saying such a venture would only create competition for its overseas arm OVL and its successful venture with steel king Lakshmi N Mittal.

The MoU between the ONGC and Ashok Leyland Project Services (ALPS) provides for sourcing of liquefied natural gas at competitive terms, to be facilitated by the Hinduja group. Pursuant to such sourcing, ALPS will be invited to participate in joint development of LNG-based downstream projects- like LNG regasification, power, petrochemicals etc as conceptualized by ONGC at Mangalore SEZ.

The parties will form joint ventures / unincorporated joint ventures, where ONGC will hold 49.98 per cent stake, the Hinduja group will hold 48.02 per cent while FIs and banks will hold the rest two per cent. The ONGC-Hinduja venture will leverage the E&P expertise of ONGC and the business-relationship advantage of the Hinduja group in the hydrocarbon-rich Middle East, with benefits to both entities.

"We think we can leverage the clout of the Hinduja group in the Gulf region in pursuing LNG and linked exploration and production business but creating another firm to look for oil will only create competition for ONGC Videsh Ltd which already has a sizeable presence in the region," a top ONGC official said.

"Moreover, another company for oil and gas field acquisition will only confuse the world... They will not know who to deal with - ONGC/OVL or ONGC-Mittal Energy Ltd (OMEL) or a newer ONGC-Hinduja combine," the official said.

The Hindujas wanted an agreement on the lines of the ONGC-Mittal venture. ONGC created two firms with Mittal - OMEL for acquisition of oil fields and ONGC Mittal Energy Services Ltd for trading, shipping and terminallying services.