Petroleum Minister Mani Shankar Aiyar on Thursday held discussions with chief executives of public sector oil companies to explore the possibility of merging BPCL and HPCL with ONGC and OIL with IOC to create two oil behemoths.
The brainstorming session was part of Aiyar's efforts to prepare India's response to global oil challenge by unifying public sector oil firms instead of the present practice of competing against each other and working at cross purpose.
Sources said Aiyar has taken a grim view of the presence of three public sector oil marketing companies -- Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp -- vying for the same market and more like Numaligarh Refinery, MRPL and Oil and Natural Gas Corp ready to enter the market.
He is also disturbed at every PSU's move to buy oil and gas fields abroad, a trend that may see Indian firms competing among themselves for the very limited assets available.
One of the proposal is for merging about 11,000 petrol stations and 32 million tonnes per annum refining capacity of HPCL and BPCL with ONGC to make the country's largest oil producer a vertically integrated firm.
Simultaneously, oil producer Oil India Ltd and ONGC's Assam and Gujarat oil fields would be given to IOC to provide India's largest retailing firms control of close to 12 million tonnes of crude oil.
Sources said the merger proposal was opposed by BPCL and HPCL who wanted more freedom to enter oil and gas exploration and production to become vertically integrated companies.
Alternatively, Aiyar also looked at options of restricting companies to only their core competencies instead of oil producers getting into fuel marketing and retailers venturing into upstream business.
The petroleum ministry, sources said, is not enthused by efforts of ONGC to get into power generation, petrochemicals and fuel retailing business. It has also not supported gas transporter GAIL's foray into liquid hydrocarbons.
"Aiyar heard views of chief executives of ONGC, IOC, BPCL and HPCL on the possible merger and concentrating on core competencies," they said, adding that the deliberations were inconclusive.
He feels that the public sector oil firms should put up a united front both at home or abroad instead of acting at cross purpose and energy security for the nation is of paramount importance.
The ministry feels that nowhere in the world are there so many public sector companies in the same line of business - three (IOC, BPCL and HPCL) in fuel retailing; two (ONGC and OIL) in oil exploration and production; and two (IOC and GAIL) in petrochemicals. Besides, IOC, BPCL and HPCL want a slice of overseas equity oil, where they will compete with ONGC Videsh.
Competition should be with private sector and not among themselves.
IOC chairman M S Ramachandran, ONGC chairman Subir Raha, GAIL chairman P Banerjee, BPCL chairman S Behuria and HPCL chairman M B Lal attended the meeting.
Senior ministry officials including petroleum secretary S C Tripathi were also present.
