GAIL next in line of ONGC acquisition


Agencies, New Delhi After acquiring oil refiner and fuel marketing company Hindustan Petroleum (HPCL) last week, the country’s largest oil and gas producer ONGC is moving closer to acquire the gas utility GAIL India Limited. ONGC on January 20 formally acquired 51.11 per cent equity share holding in HPCL.While HPCL management had certain reservations over the merger procedures and it took time for formal acquisition by the ONGC, the GAIL management was in favour of merger with the ONGC. The government’s 54.89 per cent stake in GAIL is currently worth about Rs 46,700-crore. The shake-ups in the Oil and Petroleum sector is attributed to the government’s plan to create integrated public sector oil majors to match the performance of international and domestic private sector oil and gas companies. According to sources, the two other major oil companies the Indian Oil Corp and the Bharat Petroleum (BPCL)were also in line to acquire the GAIL but certain factors were resisting their move as a section of GAIL management was in favour its acquisition by the ONGC. GAIL has listed Oil India Ltd (OIL), the nation’s second largest exploration firm, as its number two choice. The government holds 66.13% stake in OIL, which at current market price is worth about Rs 18,000-crore. GAIL feels merger with ONGC makes more sense as such a move would integrate gas producer with transportation and marketing network. Sources said Indian Oil and BPCL gave separate options for the integration. IOC wanted to either acquire another refiner or a gas company like GAIL to add to its capacity. Addition of GAIL would further consolidate its strength as GAIL has a robust marketing and gas transporting network across the country, IOC management felt. The IOC has a fledging gas business in under construction LNG terminals, city gas distribution projects and gas marketing. BPCL has also shown interest in natural gas sector and recently wrote to the Petroleum ministry saying GAIL was its number one choice for acquisition as it would diversify its business and help make an entity worth competing wit the other big players in the sector. Sources said, the government has not taken any decision on the proposals sent by other public sector units (PSUs).The government is pushing integration options as it would help it cash out on its holding yet retain its control. Also, it would help build bigger oil companies to better compete with global giants and withstand oil price volatility. Union Finance Minister Arun Jaitley had indicated such moves of the government during his 2017-18 budget speech.