The Hindu Business Line : ONGC, Mittals suspend hydrocarbon trading venture

Restructuring
All staff members of OMESL are being redeployed in OMEL and Mittal group businesses
The CEO of OMESL will soon be joining the business development activities of Mittals.

Pratim Ranjan Bose

Kolkata, Oct. 9

After prolonged tug of war, ONGC and the L.N. Mittal group have decided to suspend the operations of the overseas hydrocarbon trading and supply chain management joint venture. The upstream joint venture ONGC Mittal Energy Ltd (OMEL), however, will continue.

According to sources, in an ongoing “restructuring” exercise, all the staff members of ONGC Mittal Energy Services (OMESL) are being redeployed in OMEL and Mittal group businesses. The CEO of OMESL, Mr Surish K. Sharma, will soon be joining the business development activities of Mittals.

Confirming the news, the ONGC Chairman, Mr R.S. Sharma, told Business Line that in the absence of any major producing asset in the possession of OMEL, OMESL was interested in carrying out third party oil and gas trade on a global scale.

‘on the backburner’

“However, such activities were not in the interest of both the promoters. Accordingly, we (ONGC and Mittals) have decided to trim the establishment and put the business in the backburner,” he said.

Repeated efforts to reach OMESL and Mittal group spokespersons in London did not succeed.

Incorporated with much fanfare in mid-2005, OMESL is a 51:49 joint venture between ONGC and Mittal Investment Sarl. The mood of the partners, however, changed within months.

According to sources, Mittals were of the view that ONGC was not extending the due support (like counter guarantee) to OMESL to exploit hydrocarbon trading opportunities in ONGC assets globally as well as the third party trading opportunities India.

Differences

ONGC, on the other hand, reportedly pointed out that the joint venture was working beyond its mandate. Issues were also raised about the recruitment procedure and the heavy overhead cost, sources said.

Though sources feel that the failure of OMESL will have its due impact on the future of OMEL, the ONGC Chairman denies any such possibility.

According to him, ONGC is committed in strengthening its ties with Mittals when it comes to upstream activities. “We are committed to OMEL,” Mr Sharma said.

OMEL, currently, has only one producing asset (participatory interest) in Syria and exploration interests in Nigeria, and Trinidad and Tobago. The exploration assets are yet to enter the drilling phase.