PSU Oil Companies Team Up to Run Foreign Ventures

India's oil companies will soon come together to sport a common corporate face for their overseas ventures. The petroleum ministry is in favor of forming a new joint venture (JV) firm in which equity will be held by all PSU oil companies for their ventures abroad. The proposed company will have interests in the entire hydrocarbon chain — from oil and gas exploration, pipeline ventures and downstream businesses like refineries.

The proposed JV route will take care of all the interests of the Indian oil companies. Unlike OVL, which today represents ONGC's interests and investments abroad, the JV company will represent all stake holders in the oil sector. Speaking to ET, petroleum minister Mani Shankar Aiyar said: "The new firm could either be one JV with separate divisions for different geographical regions or the oil companies could come together to form two companies which would operate in different geographical regions."

"The petroleum ministry has also suggested a proposal to form an advisory committee, "synergy in energy" to drive this process of bringing all oil companies together to work towards increasing India's presence in the global energy market," Mr. Aiyar said.

With this, the current monopoly of OVL is likely to come to an end. Today, OVL has a near-monopoly over India's energy interests abroad. Until recently, ONGC was the only company which had an official arm to carry forward its business abroad. IOC, had also been pressing for a similar arm for its overseas work. However, in more recent times, the oil companies have adopted the consortium approach for taking up ventures abroad.

The JV will look at all investments — from upstream, to downstream and infrastructure, thanks to the proposed broadbased equity participation by upstream major ONGC, and OIL to downstream players IOC, HPCL, BPCL and transportation major Gail.

The consortium approach, where all the players in the oil market would have stakes, is expected to work better than the current scenario where oil companies are working at cross purposes. Despite having come together for ventures like LNG or gas in some countries (like Gail and OVL in Myanmar), these companies are often working against each other on foreign terrain.