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Parent loath to share ONGC Videsh equity

Calcutta, Nov. 9: Oil and Natural Gas Corporation (ONGC) has ruled out equity restructuring of ONGC Videsh Ltd (OVL), its wholly owned subsidiary, even as Indian Oil (IOC), Gas Authority of India (Gail) and Oil India (OIL) have set their sights on a slice of its equity.

The petroleum ministry is learnt to be working on a strategic restructuring of the ONGC’s overseas arm in a way that gives the three majors a stake in it — and with it access to the crude that Videsh gets in lieu of the equity it holds in overseas ventures (mostly oil fields). This is called oil equity in the oil industry parlance.

However, ONGC chief Subir Raha does not see any benefits from the proposal, which will be discussed at a meeting today between the top-brass of ONGC and OVL on the one hand and IOC, Gail and OIL on the other. Petroleum secretary B. K. Chaturvedi will be present.

“ONGC does not see more advantages or contribution in terms of technology, skill or finances by bringing other companies in OVL. Instead, there is concern that intervention will dilute its focus and affect speed,” Raha said.

Raha said nobody was interested in OVL during the last 30 years, when there was no activity. “But today, when OVL has become a successful venture, everybody wants to have a share. This is unfair,” he added.

ONGC has already invested over $ 3 billion abroad through OVL, 40 per cent of which went into risk-prone exploration ventures. The upstream oil major is planning to make Rs 14000 core-15000 crore worth of annual investments abroad through OVL in the Tenth Plan period.

“We don’t mind giving risk-sharing project equity to any oil company. At the same time, we don’t see how having people from other oil companies on the OVL board will make a difference to performance,” he said.

Stake sale

ONGC is keen to divest its stake in IOC and Gail in order to meet its cash flow requirements. The upstream major holds 5 per cent each in the two companies.

“The other option to better our cash flow situation is decontrol of gas prices. We are waiting a ministry directive on it. We are losing over Rs 1000 crore alone for having to provide subsidy on gas prices,” Raha added.

While ONGC pays $3.8 per thousand cubic metre to procure gas in its joint ventures with British Oil, Cairn Energy and Reliance, it gets just $1.2 per thousand cubic metre from customers under the controlled regime.

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