In a move that would help consolidate its businesses, ONGC aims to conclude merger of ONGC Mangalore Petrochemicals Limited (OMPL) with Mangalore Refinery and Petrochemicals Limited (MRPL) by June 2021. Once this is done it will work towards merger of MRPL with Hindustan Petroleum Corporation Limited (HPCL).

 

Speaking to reporters after ONGC’s 27th Annual General Meeting, ONGC Chairman and Managing Director Shashi Shanker said, “We are moving in the direction of vertical integration. The first step will be the merger of OMPL with MRPL. This will be followed by a merger of MRPL by HPCL. We aim to complete the OMPL-MRPL merger by June 2021.”

OMPL is jointly promoted by ONGC and MRPL.

Commenting on the Covid-19 impact on the upstream sector, Shanker said ONGC may be slightly short of meeting the ₹35,000-crore capital expenditure target for the current fiscal. This is also because of difficulties in movement of essential equipment from overseas following restrictions on movement during pandemic.

“Oil demand is likely to be 10 million barrel per day less in 2020, which is expected to pick up again with the containment of Covid-19. However, oil prices will remain an important determinant for the sector’s growth and investment prospects. Any price on the right side of $45 per barrel would be a minimum requirement to encourage the industry to invest,” he added.

“Our bottom line was further depressed due to exceptional item towards impairment loss of about ₹4,900 crore in the final quarter to factor into estimated future crude oil and natural gas prices. The impairment is a temporary adjustment in the book value to reflect future price outlook and which may get reversed in future when prices recover,” he said.

In fiscal 2019-20, ONGC had posted a revenue of ₹96,214 crore and earned a net profit of ₹13,445 crore. Lower earnings compared to previous fiscal year are a reflection of the low oil prices in fiscal 2020.

ONGC is also hit by low gas price. ONGC officials said that the current price of less than $2 per million British thermal units for domestically produced gas does not adequately remunerate the company. The breakeven price for the company is around $3.6 per mBtu.

Shanker said the government is evaluating options of giving a minimum purchase price for domestically produced natural gas. He said that while current gas production may not dip, future production will be affected if a price floor is not instituted.

Pandemic impact

Covid-19 has affected ONGC in other ways too. The company is now considering a strategic restructuring within the larger ONGC Group by 2025. “The Covid-19 crisis has clearly highlighted the need for centralisation of services and decision making. One such ambitious project is creating an Integrated Shared Service Centre,” Shanker said.

This centre would eliminate the overlapping roles and centralise functions that do not require full time deployment of manpower spread across geographies.

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