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ONGC counts on windfall

New Delhi, Sept. 20 (PTI): Oil and Natural Gas Corporation (ONGC) is likely to get windfall gains this fiscal when it starts getting international price for its crude oil, company chairman and managing director Subir Raha said today.

ONGC, which posted a net profit of Rs 6,198 crore in 2001-02 on an administered crude price of $ 16 a barrel, was in final stages of negotiating market determined prices with domestic refiners, Raha told a news conference here.

Provisonally ONGC had begun charging $ 22 a barrel beginning this year, which saw its net profit jump 34 per cent to Rs 1981 crore in the first quarter of 2002-03.

“We produce sweat crude (low in sulphur) which is benchmarked against west African bonny light crude that has averaged around $ 24 a barrel,” he said adding ONGC would get the international price once the deal is finalised with the refiners.

The pricing formula agreed upon contains a base price (linked to global price of that particular grade of crude oil), premium or discount depending on the quality of crude and freight charges, he said.

The state-run exploration firm would supply Indian Oil 10 million tonnes of crude annually, Bharat Petroleum and Kochi Refineries 8.5 million tonnes and Hindustan Petroleum and Mangalore Refinery the remaining 7.5 million tonnes. The custom and sales tax levies will be shared by ONGC and the refiners.

International prices would mean about $ 5 a barrel incremental revenue for ONGC this fiscal, Raha added.

As part of evolving into a fully integrated company, ONGC has acquired 37.4 per cent stake in Mangalore Refinery and Petrochemials Ltd (MRPL) and Mangalore-Hasan-Bangalore product pipeline, Raha said.

Besides, ONGC would infuse additional equity of Rs 600 crore and subsequent debt restructuring would give the company 51 per cent stake and management control, he said.

While MRPL will become subsidiary of ONGC, Raha said there were no plans for purchase of additional shares from the market.

ONGC, being a public sector undertaking, is exempt under the Sebi guidelines for making an open offer for acquiring additional equity.

Asked if ONGC would bid for Hindustan Petroleum and Bharat Petroleum, Raha said, “It would be decided only when terms and conditions (of bidding) are put on the table. Unless there is proposal (for disinvestment of government equity in BPCL and HPCL), it would be pre-mature to say anything on the subject.”

He, however, said that his company, in consortium with Bharat Heavy Electricals Ltd (Bhel), was in race for acquiring 51 per cent stake in Engineers India Ltd.

Raha said the range of products fractionated from natural gas and condensate is being expanded with schemes for production of aviation turbine fuel (ATF) and motor spirit (petrol) of Bharat-II specifications.

Raha said ONGC was under-producing naphtha and LPG due to glut in the market.

“We have lost about 15,000 tonnes of LPG as state-run Indian Oil, Bharat Petroleum and Hindustan Petroleum have not lifted committed quantities,” he said adding the company has asked government permission to market LPG on its own.

Insurance renewal

ONGC has completed its insurance renewal process, against its assets at a premium of $51 million. The policy, effective from May 11, will cover both onshore and offshore assets valued at $ 14 billion. It will cover operating risks as well as those arising out of war and terrorism.

It said the first instalment of the policy-premium was paid on May 10 this year and that last year the company had paid a policy-premium of $ 28 million.

Insurance premium across the world has been on a high since the attack on World Trade Tower on September 11.

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