ONGC to appoint consultant to evaluate HPCL buy

Results from drilling of 23 shale wells not encouraging, says CMD

State-run Oil and Natural Gas Corporation (ONGC) is appointing a financial consultant to value its acquisition of Hindustan Petroleum Corp Ltd (HPCL).

“We are engaging a consultant to carry out valuations and we should finalise one by the end of this month,” Shashi Shanker, chairman and managing director of ONGC, said here on Saturday.

The department of investment and public asset management has begun the sale of the government’s stake in HPCL by appointing consultants and sending an information memorandum to ONGC. “We received an information memorandum from the department of investment last week. The acquisition is expected to conclude by March,” Shanker added.

The department of investment has appointed Citibank, SBI Caps and JM Financial as consultants for the deal. The oil ministry has appointed a little-known Noida-based company, Protocol, to look into the deal.

The Union Cabinet had in July cleared the sale of 51.11 per cent of the government’s holding in HPCL to ONGC in order to create a global energy giant. Based on the current market capitalisation of HPCL, the acquisition is likely to cost ONGC Rs 35,000 crore.

On ONGC’s findings in shale oil and gas wells, Shankar said the company had drilled 23 wells and the results were not encouraging. ONGC is spending Rs 700 crore to explore shale oil and gas in the east and west coasts. Shales are sedimentary rocks that can be rich resources for petroleum and natural gas.

ONGC said it did not see any effects on operational expenditure in the medium term due to rising crude oil prices. “Our contracts are long term, and we had locked these contracts at lower prices. The rise is crude oil prices is not affecting our operational expenditure. In fact, our operational expenditure has come down significantly, year on year,” Shanker said.

It is planning to increase oil production from 22 million tonnes now to 27 million tonnes by 2021-22. Its natural gas production is set to almost double from 22 billion cubic metres to 42 billion cubic metres by 2021-22.