ONGC to take control of HPCL to create larger oil entity

The Dollar Business Bureau 

India’s state-owned oil major, Oil and Natural Gas Corporation Ltd (ONGC), will take control of the other public sector enterprise Hindustan Petroleum Corporation Ltd (HPCL) as a part of the government plan to set up an integrated public sector entity of oil and gas, reported a reputed media house on Monday quoting top officials.

The government is planning to create a huge oil firm by combining state-run companies, Finance Minister Arun Jaitley had said in his Budget speech on February 1 as the country, which is the world's third biggest consumer of oil, is looking to compete with world’s major players in acquiring international 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% in HPCL) to ONGC, which will then become the holding company of HPCL,” an official told the media house.

The step will stop a little short of a full merger, as that may take more time, but with this move the purpose will be met, added the official. 

The exploration operations of ONGC will be combined with the distribution and refining capabilities of HPCL. The HPCL, which operates and owns two key refineries in Visakhapatnam and Mumbai, has the country’s largest lubricants facility and 2nd largest network of pipeline of 3,015 km in addition to a huge marketing system. 

The motive behind such an integration is to reduce the risk from volatile oil prices, improve exploration business and when the prices drop, the distribution division is likely to gain.