Financial Daily from THE HINDU group of publications
Sunday, Nov 06, 2005
Corporate - Announcements
No plans to merge MRPL with ONGC, says Subir Raha
Coimbatore , Nov. 5
ONGC would like to keep MRPL and ONGC as two distinct entities and there are no plans to merge the two companies, the ONGC Chairman and Managing Director, Mr Subir Raha, has said.
A decision on increasing the refining capacity of MRPL (where work is now on to increase capacity from 9.69 million tonnes to 15 million tonnes per year) to 30 million tonnes would be taken in a year's time, he added.
When asked during an informal chat with the media here whether ONGC would follow the example of other oil PSUs like BPCL in merging their subsidiary stand alone refineries with the parent companies (BPCL has proposed to merge Kochi Refineries with itself), the ONGC chief remarked "not now, and not in the foreseeable future."
He said the merger of MRPL with ONGC at the time of its takeover by ONGC would have been beneficial since the losses incurred by MRPL could have been set off against the profit made by ONGC. But now, MRPL has wiped off its entire accumulated losses, has turned profitable and has also declared a maiden dividend.
Moreover, MRPL is in a different kind of business and he would like to operate MRPL, as is being done in the case of ONGC Videsh, "as independent strategic business unit".
While being part of the ONGC group, they would retain their individual identities as well. About the expansion plans for MRPL, he said the capacity of this refinery was being gradually expanded to 15 million tonnes and it was now operating at 12 million tonnes capacity. By 2007-08, it would reach 15 million tonnes. The company would establish refineries in Rajasthan and Andhra Pradesh.
On the growth strategy for ONGC given India's limited oil reserves, he said the company has to grow on all areas. India was probably the only market that has sectoral companies (like some in upstream or downstream or gas etc), whereas internationally, the petroleum companies operated on an integrated basis that gave protection against any cyclical downturn.
Like the MRPL acquisition, ONGC was also looking at options such as petrochemicals, LNG, power and shipping as vehicles of growth and was also investing in oil exploration both in India and abroad.
In the last four years, ONGC has built up almost 450 million tonnes of reserves overseas. The company has to look for traditional and new businesses to mitigate risks and for growth opportunities.
Answering a question on how much the fire accident at the Mumbai High in July would affect the financial performance of ONGC during the current fiscal, Mr Raha said gas production came back to normal by August end and the loss in gas production was about 20 per cent for about a month at Mumbai High.
Oil production at the site, which dropped to 1.40 lakh barrels a day from 2.70 lakh barrels a day after the accident, was restored to 2.25 lakh barrels a day on August 27 and by March next year, he expected the production to become normal. The loss in production there would be about 40,000 barrels a day for six months on an average. ONGC has been sourcing oil from other wells to cushion the loss in production at Mumbai High. There will be a net impact but it will be "manageable", he said.
Asked whether ONGC would have the resources needed to invest in exploration and expansion if the subsidy burden continued to bleed the company, Mr Raha said he knew how much the subsidy had cost in the first half of this year but had no clue as what would be the subsidy burden in the second half.
He knew the company's financial resources but due to subsidy, would not know what would be the topline projections and would not be able to work out the cash flow and the bottomline without it. He said, "it is a major constraint, it is true". On the request by the Centre for special dividend from ONGC, he said the ONGC board would take a decision on that and declined to discuss the deliberations in the board on this issue.
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