The Hindu Business Line : HPCL, OIL may ink pact for work in hydrocarbon chain

New Delhi March 19 State-owned Hindustan Petroleum Corporation Ltd (HPCL) and Oil India Ltd (OIL) are in the process of formalising areas of mutual interest for joint activities in both downstream and upstream segments of the hydrocarbon chain. According to sources, "a decision could be expected between the two entities shortly."

The possible area of joint cooperation that the two State-owned companies are looking at includes participation in refinery projects as well as exploration and production activities, sources told Business Line. An expert team of the two entities has examined the commercial and technical aspects of the possible joint participation of HPCL and OIL.

On what such joining of forces would mean for the companies as well as industry, Mr Ajay Arora, Partner, Ernst & Young India, said, "Such synergy in operations is a positive move and here to stay. Not only does it create more value for the organisations but it also helps in beating competition."

A draft memorandum of understanding has already been given to HPCL by OIL, sources said. As regards the equity structure for the projects where the two propose to jointly participate, sources said that it would be decided on a case-to-case basis and deliberated on at a later stage.

Sorting-out interests

Currently, OIL, jointly with Indian Oil Corporation Ltd, bids for oil and gas equity abroad. Both HPCL and OIL have partnership with other companies, so the nitty-gritty has to be worked out to avoid conflict of interest, sources explained.

OIL has expressed that it is keen to participate in HPCL's downstream activities including the Bhatinda project and Visakhapatnam refinery expansion or the company's new refinery in Visakhapatnam. OIL can either join in the expansion project or the other projects of HPCL.

Meanwhile, for its exploration and production activities abroad, OIL is looking for partners. The company has the option of participating with companies that IndianOil was not keen in, sources explained.

When compared with giants like ONGC, OIL is considered to be a small player among those pitching for oil and gas assets abroad. OIL is currently looking at partnerships with small companies for acquiring assets in Russia, Africa and Europe. For acquiring larger assets, it has a tie-up with IndianOil.