The creation of ‘integrated energy major’ will not affect the proposed mega refinery project, which is a combined initiative of three public sector oil refining-cum-retailing companies.

Takeover proposal

“There will no overlaps or conflicts. As and when work takes place on integrated energy major it will be a smooth transition of business,” Dharmendra Pradhan, Minister of State (Independent Charge) for Petroleum & Natural Gas, told BusinessLine .

Under active consideration is a proposal that public sector energy giant ONGC will take over one of the refiner-cum-retailers such as Hindustan Petroleum Corporation Ltd (HPCL). In all likelihood the government will adopt the holding company concept.

The plan is to transfer the government’s holding to ONGC, making the latter the holding company. The other oil companies — Oil India, in the upstream sector, and Indian Oil Corporation (IOC) in the downstream sector — will operate unchanged.

According to B Ashok, Chairman, IOC, integrated energy major is a policy prescription which has been made by the Finance Minister, Arun Jaitley, in his 2017-18 Budget.

Merger concept is not new to Indian oil companies. For example: The Bongaigaon Refinery was merged with IndianOil. IBP, once IndianOil’s subsidiary was also merged; Mangalore Refinery and Petrochemicals was taken over by ONGC.

Wide choice

There are multiple models which are possible for creating an integrated energy major, he said adding that “If there are companies where the cultures a similar then the merger is not that big an issue. Also there is straight acquisition.”

Ashok believes that the concept should not be restricted to PSUs. “It is not necessary to go for PSUs. Tomorrow if an international upstream company which is something within our possibility then we should look at it. The government’s statement provides us this window of opportunity,” he added. Meanwhile, work is happening on the mega refinery project of IndianOil-HPCL-BPCL. “All of us as individual oil companies know that the demand for liquid fuels is going to grow and today the size of refinery matters. Earlier, we were looking at 6 million tonnes per annum refineries, then 9 mt, 16 mt, and now the proposed 60 mt refinery in Maharashtra. The 60 mt refinery is far more economical than other existing set-ups,” Ashok said.

Working mechanism

What the companies are looking at is an integrated petrochemical-cum-refinery project. “In-principal, all have agreed to work together and the decision has been taken at the board levels also. There is also a working mechanism regarding who will do what and who is responsible for what. We have also put in some seed money for meeting the initial expenditures,” he added.

The Detailed Feasibility Report is likely to be ready by the end of this year (2017) or by early next year. Initial cost estimate was ₹1.8-2 lakh crore. Once the DFR is ready there may be a plus/minus 20 per cent variation from this estimate, Ashok said.

“We have identified the portion of the land with the government of Maharashtra and the process of acquisition is in place,” he added.

The mega refinery is also likely to have an international partner and investors.

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