Oil Sector Current Affairs

CCEA approves selling 51% stake in HPCL to ONGC

 The Cabinet Committee on Economic Affairs (CCEA) has approved sale of government’s 51.11% stake along with management control in HPCL (Hindustan Petroleum) to ONGC. HPCL will continue as PSU after the acquisition.

HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC’s portfolio, making it the third-largest refiner in the country after Indian Oil Corporation (IOC) and Reliance Industries.

Prior to the merger, HPCL will take over Mangalore Refinery and Petrochemicals Ltd (MRPL) to bring all the refining assets of ONGC under one unit. ONGC currently owns 71.63% of MRPL while HPCL has 16.96% stake in it. MRPL will be the third refinery of HPCL, which already has units at Mumbai and Visakhapatnam

Background

There are only six major PSUs in the oil sector, ONGC and Oil India Ltd being the oil producers, IOC, HPCL and BPCL are in refinery business and GAIL is in midstream gas transportation business. The rest, such as ONGC Videsh, Numaligarh Refinery Ltd, Chennai Petroleum Corp (CPCL) and MRPL are subsidiaries of one of these six PSUs.

Union Finance Minister Arun Jaitley in his 2017-18 Budget had talked about creating an integrated oil behemoth. After that oil companies were asked to give their options. ONGC had evaluated options of acquiring either HPCL or BPCL, the two downstream oil refining and fuel marketing companies. It had found that acquisition of BPCL, country’s second-biggest fuel retailer is too expensive. On the other hand, HPCL’s acquisition easier as its market cap is of Rs 58,485.55 crore and buying government’s entire 51.11% stake would entail an outgo of Rs 29,900 crore.

Comment

Acquisition of HPCL by ONGC will help the government meet 40% of its disinvestment target of raising Rs 72,500 crore in the current fiscal. More deals in the oil sector including Indian Oil Corporation (IOC) buying out explorer Oil India Ltd or Bharat Petroleum Corp Ltd (BPCL) merges with GAIL may be in the offing.

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First meeting of Integrated Monitoring and Advisory Council held in New Delhi

The first meeting of the newly formed Integrated Monitoring and Advisory Council (IMAC) was held in New Delhi.  It was chaired by Union Minister of State (I/C) for Petroleum and Natural Gas Dharmendra Pradhan.

IMAC is an inter-ministry monitoring and advisory body for policy formulation and implementation of ‘Roadmap to achieve target of 10% reduction in import dependency in oil and gas by 2021-22.

Key Highlights of 1st IMAC meeting

Ministry of Petroleum & Natural Gas highlighted major policy initiatives undertaken in recent past to enhance domestic production of oil and gas. It includes measures like resource re-assessment, Open Acreage Licensing Policy (OALP), National Data Repository (NDR), Hydrocarbon Exploration Licensing Policy (HELP), Discovered Small Field Policy, tapping unconventional sources such as Shale Gas and Coal Bed Methane (CBM), enhancing production of bio-diesel and increased use of PNG and LPG.

Officials of other ministries also explained policies, schemes and projects taken towards augmenting the supply of energy, energy saving and demand substitution/reduction through alternate modes. Ministry of Road, Transport and Highway highlighted measures undertaken such as e-tolling to cut waiting time at toll plazas and notification of fuel efficiency norms for LCV. Ministry of Rural Development stressed upon its bio-fuel scheme for rural sector.

Ministry of New and Renewable Energy (MNRE) elaborated on energy generation through renewable sources such as solar and wind power and their future strategy in this regard. Bureau of Energy Efficiency (BEE) pointed out measures for industrial and transport sectors.

It stressed on the importance of concerted and coordinated efforts for promoting conservation and energy efficiency, exploring opportunities for oil demand substitution and tapping the potential of bio-fuels in more aggressive and synchronised manner.

About IMAC

IMAC has been envisaged to facilitate better coordination and comprehensive strategy for all energy resources by focusing on supply and demand side management. It consists of Secretary, Petroleum and Natural Gas and officers from ministries of new and renewable energy (MRNE), road and transport, agriculture, urban development, power, rural development and finance.

Note: The target to cut India’s reliance on imports for meeting its oil needs by 10% to 67% by 2022 was set by Prime Minister Narendra Modi in March 2015 during Urja Sangam.

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