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Indian Oil, BPCL keen to acquire GAIL but it wants merger with ONGC

Indian Oil, BPCL keen to acquire GAIL but it wants merger with ONGC

Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd (BPCL) are both keen to acquire gas utility GAIL India Ltd to become fully integrated energy companies.

Indian Oil and BPCL have separately indicated to the petroleum ministry their interest in taking over GAIL to help add natural gas transportation and marketing business to their kitty, people familiar with the matter said. GAIL, on the other hand, feels a merger with Oil and Natural Gas Corp. (ONGC) would be more appropriate.

The merger options were indicated following finance minister Arun Jaitley’s announcement in the 2017-18 budget speech on the government’s plan to create integrated public sector oil majors that will be “able to match the performance of international and domestic private sector oil and gas companies”.

ONGC, India’s largest oil and gas producer, proposed to acquire oil refiner and fuel marketing company HPCL, which was approved by the cabinet. ONGC is currently in the process of acquiring the government’s 51.11% stake in HPCL, which at current prices is worth over Rs33,000 crore.

People in the know said Indian Oil and BPCL gave separate options for the integration. The government’s 54.89% stake in GAIL is currently worth about Rs46,700 crore. Integration options suggested by other companies would be taken up only after ONGC-HPCL merger is complete, they said. Indian Oil, the largest oil refiner and fuel marketing company in the country, wanted to either acquire another refiner to add to its capacity or a gas company like GAIL.

The firm feels it already has a fledging gas business in under-construction LNG terminals, city gas distribution projects and gas marketing. GAIL, the nation’s biggest gas transporter and marketing company, would complement that, it felt.

BPCL, on the other hand, too has natural gas ambitions and wrote to the oil ministry saying GAIL was its number one choice for acquisition. It listed Oil India Ltd (OIL), the nation’s second largest exploration firm, as its number two choice. The government holds 66.13% stake in OIL, which at current market price is worth about Rs18,000 crore.

GAIL feels merger with ONGC makes more sense as such a move would integrate gas producer with transportation and marketing network. People in the know said the government has not taken any decision on the proposals sent by other public sector units (PSUs).

The government is keen on the PSU-PSU merger or integration options as it would help it cash out on its holding yet retain its control. Also, it would help build bigger oil companies to better compete with global giants and withstand oil price volatility.

Source: livemint

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