Fire at ONGC plant in Surat extinguished; no casualty, injury reported

 A massive fire broke out at an Oil and Natural Gas Corporation (ONGC) plant in Surat, Gujarat in the wee hours of Thursday, ANI reported. No one has been injured in the accident so far, ONGC said.

The blaze, which was preceded by three blasts, has been extinguished, the official said, adding no one was hurt.

The ONGC in a tweet said, "A fire was observed in the Hazira Gas processing plant in the morning today. Fire has been brought under control. There is no casualty or injury to any person.

The reason for the massive fire is being attributed to three consecutive blasts that took place at two terminals of the Hazira-based ONGC plant in Surat at around 3:30 am.

The sound could be heard at a distance of over 10 km.

"The activity of depressurising the pressurised gas system underway by ONGC officials," said Dr Dhaval Patel, Surat Collector. The cause of the fire will be ascertained after cooling operations are completed, he added. "Other plants in the vicinity are operating as usual. I am told that the ONGC plant will also become partially operational in two to three hours," he said.

#WATCH Gujarat: A fire breaks out at an Oil and Natural Gas Corporation (ONGC) plant in Surat. Fire tenders present at the spot. More details awaited. pic.twitter.com/6xPKHW5PrR

— ANI (@ANI) September 23, 2020

There was no confirmation from the district administration of reports that the fire was apparently caused by a rupture in the 36-inch Uran-Mumbai gas pipeline.

A source familiar with the matter said the Hazira plant processes gas from the Bassein gas field, offshore Maharashtra state, south of Gujarat.

Firefighters were rushed to the spot, who have brought the fire under control.

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ONGC asks govt to cut cess, royalty, free gas price to help company survive

India's top oil and gas producer ONGC has sent an SOS to the government seeking a cut in taxes as well as being granted pricing and marketing freedom for gas to help it weather the slump in prices that has made sustaining operations difficult and may force a cut in investments.
The slump in international oil prices to low-20s ($/barrel) and natural gas prices falling to a decade low of $ 2.39 per million British thermal unit is threatening to push the company into making cash-losses on a monthly basis, sources with direct knowledge of the development said.

While the gas price is way below the cost of production, high tax incidence is resulting in cash losses even on crude oil output.
State-owned Oil and Natural Gas Corp (ONGC) last month wrote to the government seeking abolition of oil cess if price realised by producers is less than $ 45 per barrel. Also, it wants the 20 per cent of price paid as royalty to state governments be halved.
Currently, the government levies 20 per cent ad-valorem cess on the price that producers get. Also, ONGC/OIL are required to pay 20 per cent royalty on the price of crude oil it extracts from onland oil blocks to the state governments.
Sources said ONGC wants the formula of pricing domestically produced natural gas at rates prevalent in gas-surplus nations such as US and Russia. The rates using the formula came to $ 2.39 per million British thermal unit from April.
This price is the lowest that the company will realise since 2010 when the government had moved towards deregulating gas pricing.
In May 2010, the Cabinet had approved an Oil Ministry proposal to raise the rate of gas sold to power and fertilizer firms from $ 1.79 per mmBtu to $ 4.20.
ONGC and OIL got $ 3.818 per mmBtu price for the gas they produced from fields given to them on nomination basis and after adding 10 per cent royalty, the fuel cost $ 4.20 per mmBtu for consumers.
The Congress-led UPA had approved a new pricing formula for implementation in 2014 that would have raised the rates but the BJP-led government scrapped it and brought a new formula.
The BJP-led government had in October 2014 adopted a formula that takes into account the volume-weighted annual average of the prices prevailing in Henry Hub (US), National Balancing Point (UK), Alberta (Canada) and Russia with a lag of one-quarter. Prices are set every six months -- on April 1 and October 1 each year.
Sources said OID cess, which has increased from $ 3 to $ 13 over the years, is causing a lot of stress on current and new oil and gas projects.
OID Cess is levied on crude oil produced as excise duty under the Oil Industries (Development) Act of 1974. The cess is being levied on crude oil from nominated blocks and pre-NELP exploratory blocks only.
The OID cess was raised from Rs 2,500 per tonne to Rs 4,500 per tonne in March 2012. The price of the Indian basket of crude oil stood at around $ 110 per barrel then.
With the fall in global crude oil prices in mid-2014, companies asked for reducing the levy and converting it into 8-10 per cent ad-valorem. The government had changed the levy of the cess to 20 per cent ad-valorem in March 2016.
Sources said ONGC has communicated to the government that the current rate of taxes is threatening to push the firm into cash losses and will impact its planned capex.
Unless profits are made, future investments are at a risk, they said, adding ONGC fields are old and past their prime and it would be a "big, big mistake" to believe they would behave as they did a decade back without investments in pulling up recovery rates.
Sources said cutting the cess rate will make over 200 million barrel of oil equivalent of production viable at the entire industry level.

ONGC, Oil India stare at steep earnings cut as crude price crashes

Domestic oil majors- ONGC and Oil India- maybe trading 15-20 per cent higher, compared to their 52-week lows seen last month, but the challenges regarding their earnings persist and investors need to be cautious. With crude oil prices crashing, the profitability of the two companies is expected to be severely hit.
Being a play on crude oil prices and with Brent crude trading below $30 a barrel, ONGC and Oil India may not be in a position to recover their cost of production. Nilesh Ghughe, analyst at HDFC Securities, estimates including expenses for maintaining the production level (capex), ONGC’s cost of production will be close to $31 a barrel; for Oil India, it will be $25-26 a barrel. Thus, if oil prices remain at the current levels, the companies may even end up posting a loss at the pre-tax level. Brent crude prices, which had dipped below $25 a barrel, have seen some rebound after the stimulus package by the US lifted sentiment on demand. However, they are still trading around $27, less than half the 52-week high levels of $70.

Moving forward, too, Moody's expects oil prices to average $40-45 per barrel in 2020, and in a downside scenario, where economic weakness persists longer, to average $30-35 in 2020 and $35-40 in 2021. This is not good news for upstream oil producers, and both ONGC and Oil India may see pressure on net realisations. Cairn India, which is now a part of Vedanta, will also be impacted.
chart
Analysts had already been cutting their earnings estimates. Even estimating Brent prices at $42 in FY21, analyst at Edelweiss had expected a 59 per cent year-on-year decline in ONGC's FY21 earnings. This translates into a 70 per cent cut in ONGC's FY21 earnings estimates. It is unlikely that Oil India's earnings decline could be significantly different.
Given the increasingly uncertain oil price environment, ONGC's depleted cash reserves, and government guidelines which constrain state-owned enterprises' ability to lower dividends, the company’s ratings have been downgraded by Moody’s. “ONGC's credit metrics will weaken beyond the tolerance level for its ratings, if oil prices remain low for a prolonged period," says Vikas Halan, Moody's lead analyst for ONGC.
The requirement by government-owned companies to pay a minimum annual dividend equal to 5 per cent of their net worth is seen as a negative for credit profile at a time when profits are under stress and companies need to meet debt repayment obligations, too. ONGC's cash and cash equivalents declined to Rs 6,700 crore on September 30, 2019, from Rs 24,700 crore at the end of 2016, while its net borrowings increased to about Rs 1 trillion from Rs 21,500 crore during the period.

Going cheap: How ONGC compares to the world's most richly valued oil firms

State-owned Oil and Natural Gas Corporation (ONGC) is now the cheapest oil and gas company globally. Earlier this week, the company’s stock price fell below Rs 100 for the first time in 15 years. Currently, ONGC trades at 4.2 times its estimated one-year forward earnings. Most global oil and gas majors command a price-to-earnings (P/E) ratio of more than 15. Exxon Mobil and Saudi Arabian Oil Company (Saudi Aramco) have a P/E of 18.3 times and 17.3 times, respectively. While ONGC has always traded at a discount to its global peers, it has widened to record levels in recent months.
Going cheap: How ONGC compares to the world's most richly valued oil firms
“Among the global upstream peer group, it is the cheapest stock. ONGC historically has traded at a discount versus global peer group, but over the past 12 months, the discount has widened materially, and in our view, the ‘on-tap’ government selldown is the key reason,” JP Morgan analysts Pinakin Parekh and Sanket Parab write in a note.

The brokerage has a buy rating on the stock, albeit it has cut the price target from Rs 190 to Rs 172 due to a cut in earnings estimates amid weak global oil prices. JP Morgan says the stock offers attractive yields of about 8 per cent. It has identified a few other triggers for ONGC to do well.

ONGC gets green nod for Rs 3,500 cr onshore exploration project in Assam

State-run ONGChas received environment clearance (EC) for carrying out onshore exploration, development and production of oil and gas in 100 locations in non-forest area of Assam, that would entail an investment of Rs 3,500 crore, according to official documents.
The Union Environment Ministry has given green clearance to ONGC, the country's largest oil and gas exploration and production company, after taking into account the recommendations of a green panel.

"The EC is however subject to obtaining prior permission from the wildlife angle, including clearance from the Standing Committee of the National Board of Wildlife," the ministry said in a letter to ONGC.
The company proposes to carry out drilling in 100 locations to evaluate the hydrocarbon potential of 21 different onshore Petroleum Mining Lease (PML) blocks in a non-forest area covering 944.39 km in Assam and Assam Arakan Basin covering whole of the Upper Assam North in Sivasagar district.
After establishing the potential, the company will put the field under development and production. The project cost is estimated to be Rs 3,500 crore, the company added.
According to ONGC, there is still a lot of scope in exploring new sub-surface structures in Assam for hydrocarbons.
The total area of Sivasagar district PML is 957.73 square kilometre, in which Lakwa, Rudrasagar, Geleki and its adjoining areas are important oil producing fields in North Assam Shelf of Sivasagar district.
So far, more than 500 wells (including exploratory wells and development wells) have been drilled in this field with depths ranging from 2,400 metre to 4,200 metre.
The current EC has been granted for exploratory drilling of 100 wells which is a part of ongoing exploration efforts in various PML areas falling within the three main blocks of North Assam Shelf in Sivasagar district.
India is dependent on imports for crude oil, and the government is encouraging exploration and production of oil and gas.
ONGC produces 70 per cent of the country's crude oil and 60 per cent of its natural gas.

ONGC raises $300 mn via bond at 3.375%, lowest rate by any Indian issuer

State-owned Oil and Natural Gas Corp (ONGC) on Thursday said it has raised $300 million in overseas borrowing at a coupon rate of 3.375 per cent, the lowest by any Indian issuer.
The 10-year bond will mature in 2029, the company said in a statement.

"ONGC has priced its maiden offering of $bonds in the aggregate principal amount of $300 million for meeting capital expenditure in accordance with the External Commercial Borrowing guidelines issued by the Reserve Bank of India and successfully achieved its objective to set a fresh benchmark," it said.
At 3.375 per cent interest rate, this is the tightest coupon for 10-year or longer tenor offering from India ever achieved by any Indian corporate.
"The mix of investors is diverse, from across Singapore, HK, London, Taiwan, Japan and Middle East which includes 77 per cent bid from Asian investors and 23 per cent from EMEA investors. The Bankers to the deal were Citi, DBS Bank Ltd, MUFG, SBICAP and Standard Chartered," it said.
ONGC Chairman and Managing Director Shashi Shanker said the company funds its operations from internal accruals and it has capacity to do the same in future also.
"The offering of $bond however was important to set a benchmark for ONGC group which has become one of the most integrated energy major post acquisition of HPCL. It is anticipated that once the benchmark is set, it will facilitate group entities to raise funds at a competitive price," he said.
ONGC Director (Finance) Subhash Kumar added that the yield achieved in the exercise was one of the best, which further reinforces the credentials of ONGC as an integrated energy major.
"It is also expected that this issuance will enhance the group visibility in international market which will also pave way for upgraded corporate governance," he said.

ONGC jumps 9% after clarification on fire incident in Navi Mumbai plant

Shares of Oil and Natural Gas (ONGC) jumped as much as 9.02 per cent to Rs 129.80 on the BSE in the early trade on Thursday.
At 10:04 AM, the stock was trading 8 per cent higher at Rs 128.60 apiece on the BSE. In comparison, the benchmark S&P BSE Sensex was trading 100 points or 0.27 per cent higher at 36,825.
The stock got a boost after India's foreign secretary said on Wednesday that India and Russia are targeting $30 billion of annual trade by 2025.

"Seeking to boost bilateral trade from its current $11 billion, the two countries announced deals in sectors including energy, defence and shipping after a meeting between Russian President Vladimir Putin and Prime Minister Narendra Modi at an economic forum in Vladivostok," Reuters reported.
The Delhi-headquartered oil and gas company on Wednesday issued a clarification on the fire accident that took place on Monday (September 3) in its Uran processing unit.
"The accident occurred near Demineralized Water Plant (Oily Water Sewage Pit) and CISF security cabin which was outside the main process area. All out efforts were made to control the situation and fire was brought under control within a short span of time with the internal safety provisions aided by MARG (Mutual Aid Resource Group)," the company said in its BSE filing.
The company further said the offshore crude supply remains unaffected and the impact of fire in local vicinity is nil.
"We do not see a major impact of the fire incident at Uran plant on ONGC gas sales in 2QFY19. However, In July’19, ONGC’s gas sale fell by 3.4 per cent YoY led by 1.2 per cent fall in production and higher internal consumption," Yogesh Patil, Research Analyst at Reliance Securities had said on Monday.
Patil further said that fall in oil prices can impact earnings in FY20. Additionally, since the target for disinvestment receipts has increased to Rs 1.05 trillion for the financial year 2020 (FY20), it will be key overhang on the stock as the government holds 64.25 per cent stakes in ONGC.
"The stock is trading at 4.9x of FY20 earnings per share (EPS) and 3.1x of FY20E EBITDA (consensus) which is discount to long term average. Positive view on stock," Patil added.
Thus far in the calendar year 2019 (CY19), shares of ONGC have underprrformed the market by falling around 21 per cent. On the other hand, the S&P BSE Sensex has gained nearly 2 per cent while S&P BSE Energy has added 1 per cent, ACE Equity data show.

ONGC adopts Energy Strategy 2040; targets doubling of oil, gas production

State-owned Oil and Natural Gas Corp (ONGC) has set a target to double oil and gas output from its domestic and overseas fields and expand its refining capacity three-fold alongside diversification into renewables in a new vision document for 2040, its Chairman Shashi Shanker said.
ONGC Energy Strategy 2040 envisions the company as "A diversified energy company with a strong contribution from non E&P business; 3x revenues and about 5-6x market capitalisation," he said.

The firm produced 24.23 million tonnes of crude oil in the 2018-19 fiscal year and 25.81 billion cubic metres (bcm) of natural gas from its domestic fields. Another 10.1 million tonnes of oil and 4.736 bcm of gas were produced from its overseas assets.
It had a turnover of Rs 1,09,654 crore and a net profit of Rs 26,715 crore in the year ended March 31, 2019. As on August 16, it had a market capitalisation of Rs 164,458 crore.
In the company's latest annual report, Shanker said the ONGC board recently approved the business roadmap for the company and its other group entities -- 'ONGC Energy Strategy 2040'.
The 'Energy Strategy 2040' entails ONGC achieving "three times revenue distributed across exploration and production, refining, marketing and other businesses; four times current profit-after-tax (PAT), with 10 per cent contribution from non-oil and gas business; and 5-6 times current market capitalization," he said.
"The strategic roadmap envisions a future-ready organization whose growth is predicated on a few important planks: consolidation of our core upstream business (domestic and international); expansion into value accreting adjacencies in the oil and gas value chain (downstream and petrochemicals) and diversification into renewables (offshore wind) and select new frontier plays through dedicated venture fund," it said.
The document targets cumulative upstream output (local and overseas) almost doubling from current levels with 2 per cent and 5 per cent CAGR in domestic and international operations respectively.
With two 35 million tonnes per annum of oil refining capacity vested in its two subsidiaries -- HPCL and MRPL, ONGC is targeting to raise this capacity to around 90-100 million tonnes. Also, expansion is petrochemicals will be prioritised.
Besides, ONGC plans to make investments in renewables energy sources with a target to create 5-10 gigawatts portfolio with a focus on offshore wind power.
ONGC has been under pressure to reverse the falling output from its aging fields, where natural decline has set in. It is investing heavily to arrest the domestic fall while at the same time aggressively look for assets overseas.
"The strategic roadmap also looks to create long term optionality through investor play (venture fund corpus of about $1 billion) in select frontier themes such as clean energy, artificial intelligence (AI) or reservoir/field services technology," it said.
In upstream oil and gas exploration and production (E&P), priority would be accorded to select difficult plays (high-pressure high temperature, ultra-deepwater) with high-prospectivity and low stretch from current core, development of in-house enhanced oil recovery solutions to maximize legacy production, exploration-focused technology partnerships, dedicated marginal fields unit as well as building decommissioning capabilities.
Internationally, focus shifts to plays with volume in host regimes with a positive government-to-government relationship with India to secure stable energy long-term supplies, the annual report said.
ONGC said there was significant room for deriving operational synergies between HPCL and MRPL through integrated crude sourcing, centralised trading, capability and infrastructure sharing.
Expansion in petchem is based on the robust demand of outlook of 8-9 per cent CAGR for the country as well as ONGC's significant presence in the market through its subsidiaries.

ONGC overtakes IOC as most profitable PSU after profits jump by 34% in FY19

ONGC, India's top oil and gas producer, has toppled Indian Oil Corp (IOC) to regain crown of being the country's most profitable public sector company.
According to earnings statements of the listed companies, Oil and Natural Gas Corp (ONGC) reported a 34 per cent jump in its 2018-19 fiscal net profit to Rs 26,716 crore.

In comparison, IOC registered a net profit of Rs 17,274 crore for the fiscal year ended March 31, 2019.
ONGC, in the previous two financial years, had lost the most profitable PSU tag to IOC.
With its refining margins under pressure due to falling oil prices, IOC had also lost the title of being India's largest company by turnover tag to billionaire Mukesh Ambani-led Reliance Industries in FY19.
IOC had in the previous 2017-18 fiscal posted a record net profit of Rs 21,346 crore. That year ONGC had a net profit of Rs 19,945 crore.
Reliance has been India's most profitable company for the fourth year in a row. RIL, which was about half the size of IOC till about a decade back but its bet on burgeoning consumer base and foray into new businesses such as telecom, retail, and digital services vastly expanded its business, clocked a net profit of Rs 39,588 crore in FY19.
Reliance in the 2018-19 reported a turnover of Rs 6.23 trillion. In comparison, IOC posted a turnover of Rs 6.17 trillion for the fiscal, according to regulatory filings by the two companies.
It is now India's biggest firm in terms of revenue, profit and market capitalisation.
With strong refining margin and robust retail business, Reliance clocked a 44 per cent rise in revenue in FY19 over the previous year and posted a compounded annual growth rate of over 14 per cent between FY10 and FY19. In contrast, IOC turnover rose 20 per cent in FY19 and 6.3 per cent during FY10 and FY19.
Interestingly, Reliance which boasts of the highest cash reserves of Rs 1.33 trillion on the book, also has the highest gross debt of Rs 2.87 trillion at the end of March 2019.
In contrast, IOC had short and long-term loans totalling Rs 92,700 crore. ONGC had a debt of about Rs 20,000 crore.

OVL FY19 net profit soars 71% on 8% growth in overseas oil production

ONGC Videsh Ltd, the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), on Friday reported a 71 per cent jump in its 2018-19 fiscal year net profit on the back of a spike in crude oil production.
Consolidated net profit in April 2018 to March 2019 period at Rs 1,682 crore was 71.4 per cent higher than Rs 981 crore net profit in the previous financial year, the company said in a statement here.

OVL is the unlisted overseas arm of ONGC and is not obligated to report quarterly earning numbers.

Turnover rose 40.5 per cent to Rs 14,632 crore.
This came on the back of an 8 per cent surge in crude oil production from assets the company has in foreign countries. Oil production rose to 10.1 million tonnes in 2018-19 from 9.35 million tonnes in the previous year.
Natural gas output, however, fell 1.6 per cent to 4.73 billion cubic meters.
OVL holds a stake in 41 oil and gas assets in 20 countries spanning from Brazil to New Zealand.
The company said production from South Sudan's Greater Pioneer Operating Company (GPOC) has resumed during the year after prolonged shutdown since December 2013. Presently, the block is flowing crude oil at about 35,000 barrels per day.
The firm also struck oil for the second time in a Colombian block, CPO-5. "The well flowed at a self-flow rate of about 4,000 barrels per day," the statement said adding oil was first discovered on the block in 2017.
"With the two wells, current production from CPO-5 is more than 8,000 barrels per day," it said.
During the year, the company and its partner in Mozambique's giant Rovuma Offshore Area 1 gas field have sold around 11 million tonnes per annum of the LNG that will be produced from the project to several global consumers and traders.
Also, the company shipped the first equity oil cargo from Lower Zakum Concession in UAE to group refinery at Mangalore.
OVL's assets abroad hold in-place reserves of about 676 million tonnes of oil and oil equivalent gas.

Disinvestment booster: ONGC board clears Rs 40 bn share buyback

In a boost for the government's effort to meet its disinvestment target for the current financial year, the board of state-run Oil and Natural Gas Corporation (ONGC) on Thursday approved its share buyback worth Rs 40.22 billion.
As on December 11, the government has realised Rs 340.05 billion as disinvestment proceeds against the budget estimates of Rs 800 billion in 2018-19. In a filing to the Bombay Stock Exchange (BSE), ONGC said today that it will repurchase 1.97 per cent stake or 25,29,55,974 equity shares at a price of Rs 159 per share. Last month, ONGC had reportedly approached the finance ministry stating that the company would not be able to go for a share buyback and pay interim dividend too. The company was under financial stress after the acquisition of 51.11 per cent stake in Hindustan Petroleum Corporation (HPCL) for Rs 369.15 billion and 80 per cent stake in Gujarat State Petroleum Corporation’s (GSPC) Krishna Godawari basin block for Rs 77.38 billion.

After these acquisitions, ONGC’s consolidated debt was seen at Rs 1.11 trillion during the previous financial year, causing a concern for the largest hydrocarbon producer in the country. “For a company like ONGC with a net worth of over Rs 2 trillion, a buyback of Rs 40 billion will not cause any material impact. If the majority shareholder asks for it, a company with strong financials can go for it,” said R S Sharma, former chairman and managing director of ONGC.
According to sources Department of Investment and Public Asset Management (Dipam) is targeting around Rs 150 billion of the financial year’s divestment target from share buybacks. Share buyback is the repurchasing of shares by the company that issued it.
The government was targeting three cash-rich oil majors Indian Oil Corporation (IOC), Oil India and ONGC to raise at least Rs 100 billion out of this. IOC too had said that it will buyback shares worth Rs 44.35 billion and will pay a dividend to the tune of around Rs 65.56 billion. On November 23, OIL board too had cleared a buyback of 4.45 per cent for Rs 10.85 billion.

OPaL to raise Rs 30 billion for debt repayment, capital expenditure

Having successfully mopped up Rs 3.35 billion through its maiden issuance of listed non-convertible debentures (NCDs), ONGC Petro additions Limited (OPaL) is looking to raise another Rs 26.5 billion in one year.
A joint venture of ONGC Ltd. & GAIL (India) Limited and co-promoted by GSPC, OPaL is planning to raise a total Rs 30 billion through multiple tranches for retiring short term loans and partly funding its capital expenditure.

Of the total Rs 30 billion to be raised in a year, the company has successfully raised Rs 3.35 billion through NCDs at a coupon rate of 8.6 per cent. With a tenure of three years and three months, the NCDs have attracted a rating of AAA (S) by ICRA Ltd. and AAA (SO) by CARE Ratings Ltd.
What's more, the maiden NCD issuance of the company received strong response from investors with bids received in excess of Rs 14 billion for an issue size of Rs 2.5 billion having an option to retain oversubscription. The issue drew response from different investor classes like mutual funds, insurance companies, pension funds and banks.
OPaL has appointed Trust Investment Advisors Pvt. Ltd. as advisors to its maiden NCD issuance program.
Having already spent Rs 300 billion of capex in its Dahej petrochemical plant and stabilised production, OPaL is looking to raise more funds for adding assets that would aid production, as per sources. While the current Rs 3.35 billion raised through NCDs would be used entirely to retire short term loans, the next phase of bonds coming up in January is likely to be partly used for capex as well.
OPaL's grass root mega petrochemical project at Dahej in Gujarat is part of the Petroleum, Chemicals and Petrochemical Investment Region (PCPIR), a first of its kind in the country. The complex mothers a dual feed cracker with a capacity to produce 1100 KTPA ethylene, 400 KTPA propylene along with polymerization units and various associated units comprising pyrolysis gasoline hydrogenation unit, butadiene and benzene extraction units.

To keep fuel rate in check, ONGC may get dividend waiver for price freeze

As part of a long-term solution to keep petrol and diesel prices in check, the government is in talks with Oil and Natural Gas Corp (ONGC) to freeze the price of the crude oil it supplies to oil-marketing companies. According to sources, this could lead to the company getting a waiver on the dividend it pays to the Centre, which is Rs 50-60 billion on an annual basis.
Petroleum Minister Dharmendra Pradhan held a meeting with oil firms on Thursday to find ways to keep fuel prices low despite high global oil prices. The proposals before the Centre include discounts on crude oil or a windfall tax on producers such as ONGC and Oil India.

The windfall tax proposal involves oil producers paying a special tax on any revenue earned from crude oil prices crossing $70 a barrel. The revenue will be used to pay Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) to absorb the fuel price hike.
A government source confirmed that one of the proposals under consideration was part or full waiver of dividend if ONGC sold crude oil to oil-marketing companies at a pre-determined ceiling price. However, this is unlikely to affect the dividend payout to other shareholders. In 20 17-18, ONGC paid a total dividend of Rs 84.70 billion, of which the government's share was Rs 57.36 billion. The government holds a 67.72 per cent stake in ONGC.
An ONGC executive said no such proposal had been made to the company.
Talking to the media on Thursday, ONGC Chairman and Managing Director Shashi Shanker said, “We had no discussions with the government regarding oil prices.” The meeting took place after Shanker made the statement, according to sources.
The plan to place part of the oil price burden on ONGC has been doing the rounds for some time. The finance ministry is not keen to cut the excise duty and was looking at alternative means to reduce fuel prices.
Till June 2015, ONGC and OIL India were bearing a share of the subsidy burden of oil-marketing companies for selling kerosene and LPG below market prices. The subsidy sharing was in the form of a discount on crude oil that ONGC and OIL India sold to oil-marketing companies. “We have done an internal assessment of the impact on government finances if a cut in the excise duty is announced. For every Rs 1 per litre cut, the Centre will have to forgo Rs 140 billion in revenue,” according to a revenue department official.
On Friday, prices of petrol and diesel were cut by 6 paise and 5 paise, respectively, to Rs 78.29 a litre and Rs 69.20 a litre. During the day, Brent crude oil was $77.69 a barrel, while the Indian basket was $75.73 a barrel.
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ONGC to acquire govt's entire 51.1% stake in HPCL for Rs 369.15 bn

State-run Oil and Natural Gas Corporation (ONGC) will acquire the 51.1 per cent government stake in Hindustan Petroleum Corporation (HPCL) at a cost of Rs 369.15 billion. The deal is expected to be completed by the end of this month.
ONGC will pay the government Rs 473.97 per share, at a premium of over 10 per cent of the 60-days’ weighted average price of HPCL's scrip. The deal will also help the government to surpass the disinvestment target of Rs 725 billion for 2017-18. As of January 11, the total disinvestment proceeds for the current fiscal year stood at Rs 543.3 billion and this will be for the first time since 2009 that a government will be surpassing its disinvestment target. Since it is a related-party transaction, market regulator the Securities and Exchange Board of India (Sebi) has already granted an exemption for an open offer in November last year.
The deal will also have a positive effect on the government’s disinvestment target. Against a budgeted disinvestment target of Rs 725 billion, the Centre could garner anything between Rs 900 billion and Rs 1 trillion now, which could go some way to make up for the shortfall in other revenue items such as the goods and services tax.
ONGC said in a statement on Saturday that its board had considered the proposal on Friday and a share purchase agreement with the President for acquiring the 778 million equity shares of HPCL (51.11 per cent) was signed.
ALSO READ: ONGC deal will benefit in terms of crude procurement, says HPCL CMD
“Requisite approval from the shareholders of ONGC for the related-party transaction will be sought by ONGC after the execution of the share-purchase agreement. The acquisition has been made on an arm’s length basis. The transaction is exempt from the requirement to make an open offer,” the statement said.
A top ONGC source said, “We haven’t yet finalised we will be financing the deal. We have a good cash balance.
Approvals from shareholders are in place to borrow up to Rs 250 billion. In addition to this, the option of selling stakes in GAIL (India) and Indian Oil are also available. We may go for a mix of these options.” ONGC currently holds 13.77 per cent stake in IOC and 4.87 per cent in GAIL.
The Cabinet Committee on Economic Affairs had approved in principle the deal on July 19 and the alternate mechanism set up for the finalising the price, terms and conditions of the transaction accorded its final approval on January 20 this year. The company said no other regulatory approval was required for the transaction.
“The acquisition has been undertaken in furtherance of the government’s objective to combine the various central public sector enterprises to give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders and create an ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies,” it said.
ONGC expects that as an integrated oil conglomerate, its performance will be less affected by the volatility of crude oil prices due to the diversification of its cash flows to midstream and downstream presence. On Friday, ONGC's share had closed at Rs 193.60 on the BSE, down 0.23 per cent, while HPCL’s shares closed at Rs 416.55, up 1.34 per cent.
SBI Capital Markets and Citi Global acted as the transaction advisers and Shardul Amarchand Mangaldas acted as the legal adviser to ONGC. The government had appointed JM Financial as the transaction adviser and Cyril Amarchand Mangaldas as the legal consultant last year.
Experts are of the opinion that this acquisition will help ONGC.
“This is the best in-organic growth for ONGC. In one stroke it is becoming a fully integrated company. At 10 per cent premium to the current market price, this is a fair deal for ONGC and presence in upstream and downstream will help to address the volatilities in market,” said R S Sharma, former ONGC chairman and managing director, and the current chairman of FICCI Hydrocarbon Committee.
What will HPCL bring to ONGC's table?
HPCL markets around 35.2 million tonnes (MT) of petroleum products and 21 per cent
It has refineries at Mumbai and Visakhapatnam and a joint venture refinery at Bhatinda.
It owns the biggest lube refinery and the second largest cross country product pipeline network of about 3500 km in India.
Its marketing network includes terminals, depots, LPG bottling plants, Lube blending plants, aviation fuel stations and around 15000 retail outlets.
HPCL owns and operates LPG cavern at Visakhapatnam in a joint venture with Total and has 16.96 per cent equity stake in Mangalore Refining and Petrochemicals Ltd.
HPCL also have other joint ventures in the areas of City Gas distribution, cross country pipelines, production and marketing of bitumen emulsions and bio-fuels.

Chopper with five ONGC officials on board goes missing off Mumbai coast

A Pawan Hans helicopter, which was heading to ONGC's north field with seven people on board, went missing off the Mumbai coast on Saturday, official sources said.
The chopper, Dauphin N3, bearing registration number VT-PWA, took off from Juhu aerodrome at 10.25 AM, with five ONGC employees and two pilots on board, they said.
The chopper was scheduled to land at the designated oil rig at Mumbai High at 11 AM, the sources said.
Search operations are on, they added.
The Navy said it had deployed its stealth frigate INS Teg for the search operation while surveillance aircraft P8i is also being press into service.