Indian Oil strategic stake sale now a desperate need

The Narendra Modi government is about to load off a big chunk of government shares from state-owned oil company Indian Oil. The Centre seeks to reduce government participation to below 5% in this organisation. Officials expect that the strategic sale will add Rs 33,000 crore to the public exchequer.

However, control of the country’s largest oil refining company will stay in the hands of government and state-run companies, sources said.

A proposal to reduce the government’s stake in PDSUs to sub-51% by selling off stakes to competent companies has long been under consideration of the Modi government. Indian Oil is one of the companies on the list.

The Modi cabinet may decide on this issue next week. It should be noted that 51.5% of Indian Oil’s stake is directly in the hands of the Union government. In addition, three other public sector companies, LIC, ONGC and Oil India Limited (OIL), together own an additional 25.9%. Among these companies, ONGC is looking for buyers, too, as HPCL is proving a burden. Reducing government stakes in BPCL to below 53% is already sanctioned.

The reason to load off more shares is as follows.

The government has targeted a Budget deficit to 3.3% of GDP in the current year. However, due to the slowdown, the revenue collection is low and it is doubtful how successful the government will be in meeting that target.

The government had noticed by the time half the current financial year passed that 92.6% of the deficit it could afford as per the Budget was already gone. This was albeit lower than 95.3% in April-September, 2018-19, assisted by transfers from the RBI.

Now tax revenues are down too. So, the government has drastically reduce spending and disinvest to achieve the FY20 fiscal target of 3.3% of GDP. The government is, therefore, compelled to reduce the cost of infrastructure and development projects as the money going into welfare is a political hot potato. In this situation, the Centre is emphasising maintenance of financial discipline of the government through the process of divestment.

The target is to raise a record amount of money this fiscal year by selling shares of state-owned companies. The Centre has decided to raise Rs 1 trillion this year by selling stakes of PSUs alone.

The Department of Investment and Public Asset Management (DIPAM) has been made the nodal agency for making all strategic decisions regarding strategic sales throughout the process. In addition, the government will talk to all stakeholders to seek EOIs, sources said.


ONGC plant fire: 4 killed, 3 injured; operations unaffected

Mumbai: Four people were killed and three seriously injured when a fire broke out at an oil and gas processing plant of ONGC at Navi Mumbai township, a top official and the police said. Those killed include three personnel of the Central Industrial Security Force (CISF), which is responsible for the security of the Uran plant of Oil and Natural Gas Corporation (ONGC). The fourth was an employee of ONGC.

Officials said the three injured are also CISF personnel.

Oil production was not impacted by the fire but ONGC diverted natural gas produced from fields in the Arabian Sea to a similar processing facility at Hazira in Gujarat.

“A fire was reported at around 7.15 am this morning at stormwater drainage unit of the Uran plant possibly due to a gas leak. By 9.30 am the fire was brought under control. Unfortunately, we lost four precious lives in the accident,” Oil Minister Dharmendra Pradhan said in New Delhi. He asserted that there was no crisis and things were under control.

The Uran facility of ONGC receives and processes about 12.5 million tonnes per annum of crude oil and about 11.5 million standard cubic meters per day of natural gas and associated condensate from fields in the Arabian Sea.

The facility extracts value-added products such as LPG, C2/C3, and naphtha before supplying crude oil to refineries and natural gas to downstream consumers.

Uran plant handles nearly 48% of ONGC’s total crude oil production and accounts for nearly 12% of its gas sales. It produces nearly 42% of ONGC’s total output of value-added products.

Officials said almost half of the total revenue of the Uran plant comes from the sale of LPG.

Following the blaze, thick smoke engulfed the area, the police said, adding that they appealed to people staying in villages in the plant’s vicinity not to panic, and assured things were under control.

The victims died during a blast while they were trying to check gas leakage at the site, a senior CISF official said.

The mishap took place around 6.47 am in the ONGC’s processing plant at Uran town, located around 50 km from here, a police official said.

Four people were killed and three others injured in the mishap,” a senior police official said.

The deceased included three CISF fire personnel Eranna Nayakka, Satish Prasad Kushwaha, and MK Paswan, who were trying to stop the gas leakage, and resident Production Superintendent CN Rao of the ONGC, CISF’s Deputy Inspector General (west zone) Nilima Singh said.

The injured persons were admitted to a nearby hospital for treatment, she said.

At least 22 fire brigade tenders, including those of the ONGC, Jawaharlal Nehru Port Trust (JNPT), Reliance Group, Navi Mumbai civic body and the Maharashtra Industrial Development Corporation at Taloja, were rushed to the spot.

The ONGC on its Twitter handle said, “Fire broke out in stormwater drainage in Uran Plant early morning successfully doused within two hours by fire fighting team. #ONGCs robust crisis mitigation preparedness helped put off this major fire in a very short time.”

Earlier, in another tweet, it said, “A fire broke out in stormwater drainage early morning today in Uran oil & gas processing plant. ONGC fire services & crisis management team immediately pressed into action. Fire is being contained. No impact on Oil processing. Gas diverted to Hazira Plant. The situation is being assessed.”

The exact cause of the fire was yet to be ascertained.

According to Singh, a CISF fire station was informed in the morning about gas leakage near the LPG plant of ONGC. The CISF personnel and others then rushed to the site and detected leakage. “They managed to close the valve and were observing if there was any other leakage, but there was a blast and all the three CISF personnel along with ONGC DGM died,” Singh said, adding that the blast took place in the crude handling plant of the ONGC.

The CISF fire team continued with fire fighting and managed to control the blaze.

Three other CISF fire personnel also suffered burn injuries and were hospitalised, Singh said. “Because of the alertness and dedication of the CISF personnel, major damage to the entire plant and township was averted. The CISF personnel sacrificed their lives in the line of duty,” she added.

Meanwhile, the police said there was nothing to worry and asked people staying near the plant to stay calm.

“The situation is under control and we appeal to the villagers staying nearby not to panic,” a senior police official said.

The state-owned ONGC is the largest crude oil and natural gas company in the country.


Pawan Hans’ strategic sale attempt anew for 3rd time

Mumbai: Making another attempt to exit from the chopper operations business, the government on Thursday issued a fresh bid document for strategic disinvestment in Pawan Hans, offering the company to bidders having a minimum net worth of Rs 350 crore.

The government holds 51% stake in Pawan Hans, which has a fleet of 43 helicopters. The remaining 49% is with oil and gas behemoth Oil and Natural Gas Corporation.

“The GOI acting has ‘in-principle’ decided to disinvestment its entire equity shareholding of 51% in Pawan Hans Ltd (PHL) by way of strategic disinvestment to investor(s) along with transfer of management control… In addition to the above, Oil and Natural Gas Corporation (ONGC) has also decided, that it shall sell its entire shareholding of 49% in Pawan Hans Ltd, at the same derived price per share and on the same terms and conditions…” as per the Preliminary Information Memorandum (PIM).

This is the third time in last 16 months, the government has sought to attract a buyer for Pawan Hans, which is estimated to have posted the loss to the tune of Rs 72.42 crore in the previous fiscal.

The last date for submission of Expression of Interest (EoI) is 22 August 2019, and intimation to the short-listed bidder is 12 September.

The government has appointed SBICap as its advisor to advise and manage the strategic disinvestment of PHL (“Proposed Transaction”).

According to the 122-page PIM, the bidder should have a minimum net worth of Rs 350 crore. In the earlier bid document, this amount stood at Rs 500 crore.

In the case of the consortium also, the combined net worth of all the members of the consortium should be Rs 350 crore, the Preliminary Information Memorandum document stated.

For entities which are Air Transport Service Operators (ATSOs) and hold up to 51% equity share capital of the consortium, the net worth limit and profitability will not be applicable.


IOC becomes most profitable PSU amid soaring petrol and diesel rates

New Delhi:  Fuel retailer IOC has for the second year in a row beaten ONGC to become India’s most profitable state-owned company, raising questions over calls for the explorer to subsidise retailers amid soaring petrol and diesel rates.
While billionaire Mukesh Ambani-led Reliance Industries retained the crown of being India’s most profitable company for the third year in a row, posting highest ever net profit of Rs 36,075 crore.


IOC, which has for decades been India’s biggest company by turnover, last week posted a record net profit of Rs 21,346 crore in the fiscal year ended 31 March 2018 (FY 2017-18), up 12% from Rs 19,106 crore in the last fiscal.

Oil and Natural Gas Corp (ONGC) yesterday reported its FY18 numbers – 11.4% rise in net profit to Rs 19,945 crore.

Tata Consultancy Services, India’s largest software services exporter, with a net profit of Rs 25,880 crore was the second most profitable company in the country.

ONGC was for long India’s most profitable company but lost the crown to private sector Reliance and TCS three years back. In fact, its profit was higher than the combined net profit of the three State-owned fuel retailers – IOC, Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) but now it is behind IOC.

For 2017-18, HPCL last week reported its highest ever net profit of Rs 6,357 crore on a turnover of Rs 2.43 lakh crore. BPCL earlier this week reported a net profit of Rs 7,919 crore for the fiscal.

The sustained profitability of the refining and marketing companies has led to some questioning the rationale of asking ONGC to subsidise fuel that IOC, BPCL and HPCL sell.

“Look at their profits. They don’t need any subsidy support,” said a senior ONGC official. “We are in the capital-intensive business of oil and gas exploration and production which has to be necessarily funded through internal accruals. Unlike refiners, we cannot get loans for risk E&P business,” he said.

ONGC is investing Rs 30,000 crore to Rs 35,000 crore annually, which cannot be sustained if it is again asked to subsidise fuel, an official said.

Upstream oil producers, ONGC and Oil India Ltd had until June 2015 provided for up to 40% of the annual fuel subsidy bill.

This they did this by way of providing discounts on crude sold to downstream refining and marketing companies, IOC, BPCL, and HPCL. This discount helped the retailers make good a part of the losses they incurred on selling petrol and diesel below cost.

The idea of upstream producers again subsidising fuel has been mooted after petrol and diesel prices earlier this week hit a record high of Rs 78.43 per litre and Rs 69.31 respectively. Rates have since marginally cooled but the threat still remains.


Cochin Shipyard: 5 killed in blast on ship under repair

Kochi: Five people were killed and three injured in a fire following an explosion on an under repair ONGC drillship at the Cochin Shipyard premises today, a shipyard official said.

Those killed in the accident are believed to be contract workers, he said.

The injured have been admitted to a private hospital here, he said, adding that the condition of one of them, who suffered 40% burns, is stated to be critical.

State-owned Oil and Natural Gas Corp (ONGC) said the blast was reported in its drillship Sagar Bhushan at 0915 AM at Cochin Shipyard (CSL) where it has been dry-docking since 7 December 2017.

No ONGC employee was on the drillship when the accident occurred.

“The drillship was undergoing mandatory Special Survey (Hull & Machinery) repairs as per class requirement,” the company said in a statement. “The cause of the incident is being ascertained.”

The CSL spokesperson earlier today said 11 people trapped inside the ship were evacuated and rushed to city hospitals.

City Police Commissioner MP Dinesh visited the accident site and said those trapped on the ship were evacuated and the situation was under control now.

The blast reportedly occurred in a water tank on the front side of the ship docked in the yard for repair.

Police said smoke inhalation is suspected to be the reason for the casualties.

Shipping Minister Nitin Gadkari expressed shock over the loss of lives in the blast.

“Shocked by the unfortunate blast at Cochin Shipyard… My heartfelt condolences to bereaved families. I have spoken to MD, Cochin Shipyard and asked him to provide all necessary medical support to victims to initiate an immediate inquiry with help of concerned agencies (sic),” he tweeted.

Kerala Chief Minister Pinarayi Vijayan condoled the death of the five persons in the blast.

In a Facebook post, he said directions have been issued to conduct rescue operations and provide urgent medical care to the injured.



ONGC buys govt’s 51.11% stake in HPCL

New Delhi: State-owned Oil and Natural Gas Corp (ONGC) on Saturday announced acquisition of government’s entire 51.11% stake in oil refiner HPCL for Rs 36,915 crore, paying a premium of over 10%.

ONGC will pay Rs 473.97 per share for 77.8 crore shares of the government in Hindustan Petroleum Corp Ltd (HPCL), the company said in a stock exchange filing. The price it is paying is 14% higher than Friday’s closing price of HPCL and over 10% of the 60 -day weighted average of the scrip.

The transaction, which will help the government cross its annual sell-off (disinvestment) target for the first time ever, has been executed through an off-market deal.

Also, the company has cash reserves of about Rs 12,000 crore. Sources said ONGC has already taken board approval for raising borrowing limit to Rs 35,000 crore from the previous approval of Rs 25,000 crore.

Based on Friday’s closing price of Rs 416.55, HPCL has a market capitalisation of about Rs 63,475 crore. At this price, the government’s 51.11% stake is worth Rs 32,442 crore.

“Government of India has entered into an agreement with ONGC today for strategic sale of its 51.11% equity share-holding in HPCL at a consideration of Rs 36,915 crore,” the finance ministry tweeted.

The Union Cabinet, in its meeting held on 19 July last year, gave ‘in-principle’ approval to the said proposal and decided to set up an alternative mechanism under the finance minister to decide on the price, timing and the terms and conditions of the strategic sale.

Through this acquisition, ONGC will become India’s first vertically integrated ‘oil major’ company, having presence across the entire value chain. The integrated entity will have advantage of having enhanced capacity to bear higher risks and take higher investment decisions etc.

In this process, ONGC has acquired significant mid-stream and downstream capacity and will attain economies of scale at various levels of operations.

With a turnover of Rs 2,13,489 crore and profit of Rs 6,502 crore during 2016-17, HPCL ranks at 384th position in Fortune Global 500 and 48th place in Platts 250 Global Energy Companies.

HPCL markets around 35.2 million tonnes of petroleum products with a market share of about 21% and is number one lube marketer in the country. It has refineries at Mumbai and Visakhapatnam and a joint venture refinery at Bhatinda.

It owns the biggest Lube refinery in India and the second largest cross country product pipeline network of about 3,500 km. HPCL has a vast marketing network spread across the length and breadth of the country with terminals, depots, LPG bottling plants, Lube blending plants, aviation fuel stations and around 15,000 petrol pumps.

“ONGC Board on January 19 2018 considered the proposal and approved acquisition of the entire 51.11% shareholding (778,845,375 equity shares) of the President of India, at a cash purchase consideration of INR 473.97 per share with a total acquisition cost of Rs 36,915 crore,” the company said.

ONGC is the largest producer of crude oil and natural gas in India, contributing around 70 per cent of domestic production.



Govt set to hit divestment goal first time

New Delhi: The government is all set to cross annual disinvestment target this fiscal for the first with ONGC buying the Centre’s entire 51% stake in HPCL for Rs 36,915 crore.

Total disinvestment proceeds during the current financial year 2017-18 stood at Rs 54,337.60 crore (as on 11 January 2018). With its stake sale in HPCL, the government’s disinvestment receipt will work out to be Rs 91,252.6 crore.

The higher receipt from disinvestment will help the government in sticking to its fiscal deficit target of 3.2% of the GDP this financial year, which may see lower collections from the newly introduced Goods and Services Tax.

In the Union Budget presented on 1 February last year, Finance Minister Arun Jaitley had set the target of disinvestment in public sector units at Rs 72,500 crore.

This include Rs 46,500 crore as disinvestment of CPSEs, Rs 15,000 crore from strategic disinvestment and Rs 11,000 crore from listing of insurance companies.

The government reduced its stake in several PSUs this year, including HUDCO, EIL, NTPC, NALCO and OIL. Two state- owned insurance companies, GIC and New India Assurance were listed on stock exchanges this fiscal.

In the last fiscal, the government had raised a record Rs 46,247 crore. In the Budget for 2016-17, it had set a target of Rs 56,500 crore from disinvestment. Later in the the Revised Estimates, the target was scaled down to Rs 45,000 crore.

State-owned Oil and Natural Gas Corp (ONGC) today announced acquisition of the government’s entire 51.11% in oil refiner HPCL for Rs 36,915 crore, paying a premium of over 10%.

Earlier in the month, the government had announced to curtail its additional market borrowing programme by 60% to Rs 20,000 crore.

The decision to lower additional borrowing, which was taken after a review of revenue receipts and expenditure, will help contain fiscal deficit that has come under stress on account of lower GST mop up.

In the Budget, the government had announced the fiscal deficit target for fiscal ending March 2018 at 3.2% of the GDP.



Pawan Hans chopper crashes off Mumbai coast, 5 bodies found

Mumbai: A Pawan Hans helicopter with five ONGC personnel and two pilots on board today crashed off the city coast while heading to an oil rig at Mumbai High, and five bodies bodies have been found, a senior Coast Guard official said today.

The chopper Dauphin N3 had gone missing after taking off from Juhu aerodrome at 10.30 AM.

“The Coast Guard confirms that its ships picked up three bodies from the site of Pawan Hans helicopter crash off the Mumbai coast,” a Coast Guard spokesperson said.

The chopper, bearing registration number VT-PWA, was scheduled to land at the designated oil rig at Mumbai High at 11 am. Five employees of state-owned Oil and Natural Gas Corporation (ONGC) and two pilots were on board the chopper.

The Navy said it had deployed its stealth frigate INS Teg for the search operation while surveillance aircraft P8i was also pressed into service.

The Coast Guard had also diverted its ships to search the missing chopper.

A senior Directorate General of Civil Aviation (DGCA) official said that the aircraft accident investigation body AAIB will probe the Pawan Hans chopper crash.

“Since it is a clear accident, this chopper crash will be probed by the Aircraft Accident Investigation Bureau (AAIB),” the official told PTI.

He said the DGCA will extend all necessary help to the AAIB in conducting the probe.

AAIB is the apex body which probes serious incidents and accidents involving aircraft registered in India and comes under the civil aviation ministry.

Minister of State for Civil Aviation Jayant Sinha expressed deep anguish over the loss of lives.

“IndiaCoastGuard Ship on receipt of information reached area, located the debris, picked up a body at 1230 hrs,” he said on twitter.

“So far resulted in 03 body recovery. Search & rescue operations are underway. Aircraft Accident Investigation Bureau will launch thorough inquiry (sic),” he tweeted.



Private sector’s role in oil and gas expanded

New Delhi — The Union Cabinet chaired by Prime Minister Narendra Modi today gave its approval to the Marginal Fields Policy (MFP), for development of hydrocarbon discoveries made by national oil companies Oil & Natural Gas Corporation Ltd (ONGC) and Oil India Ltd (OIL).

These discoveries could not be monetised for many years due to various reasons such as isolated locations, small size of reserves, high development costs, technological constraints, fiscal regime etc.

Under the new policy, 69 oil fields that have been held by ONGC and OIL for many years, but have not been exploited, will be opened for competitive bidding.

Under this policy, exploration companies will be able to submit bids for exploiting these oil fields. These oil fields have not been developed earlier as they were considered marginal fields, and hence were of lower priority. With appropriate changes in policy, it is expected that these fields can be brought into production.

In keeping with the principle of `minimum government, maximum governance’, significant changes have been made in the design of the proposed contracts. The earlier contracts were based on the concept of profit-sharing. Under that methodology, it became necessary for the government to scrutinise cost details of private participants and this led to many delays and disputes.

Under the new regime, the government will not be concerned with the cost incurred and will receive a share of the gross revenue from the sale of oil, gas etc. The second change is that the licence granted to the successful bidder will cover all hydrocarbons found in the field. Earlier, the licence was restricted to one item only (for example, oil) and separate licence was required if any other hydrocarbon, for instance, gas was discovered and exploited.

The new policy for these marginal fields also allows the successful bidder to sell at the prevailing market price of gas, rather than at administered price.

This decision is expected to stimulate investment as well as higher domestic oil and gas production.