ONGC to merge HPCL to create an integrated oil giant: report
27 February 2017
State-run Oil and Natural Gas Corp will take control of downstream operator Hindustan Petroleum Corp as part of the government's plan to create an integrated public sector oil entity without affecting the present industry equations.
The government had plans to create an integrated oil company by merging either of the two smaller downstream refiners Bharat Petroleum Corporation or Hindustan Petroleum Corporation with oil explorer Oil and Natural Gas Corp to create an industry giant, according to a report in The Economic Times.
Finance minister Arun Jaitley had, in the budget speech early this month, hinted at creating an oil giant by merging state-owned oil companies as India, the world's third largest oil consumer, looks to better compete with global majors in acquiring foreign assets.
"It is a very big decision. A cabinet note will soon be moved. The government of India will transfer its majority shareholding (of 51.11 per cent in HPCL) to ONGC, which will then become the holding company of HPCL," the paper wrote citing one of the officials.
ONGC is expanding operations in the exploration field as well and the company's board has recently approved investment of Rs7,327 crore in four projects.
The aim of the merger is not the creation of an oil giant, rather the government's strategy is to create a company with operations from exploration to refining and retail, the report quoted officials as saying.
The merger proposal will not invite any anti-trust investigation nor will it affect efficiency in the oil sector, the report adds citing sources.
Also, integrated oil companies will be able to withstand pressures from oil price fluctuations. An oil explorer will be able to source cheaper even when oil prices go up and the refiner will be able to ensure smoother supplies.
At the same time the merger will ensure stability in operations and profitability and ensure there is less volatility in profits.
It is, however, not known when and how the actual merger will take place, but, according to reports, the immediate goal is integration of operations and this may not take much time to achieve.