No move to hive off OVL from ONGC

The government today denied any move to hive off ONGC Videsh Ltd from its parent Oil and Natural Gas Corp (ONGC), saying the present arrangement of letting the subsidiary company scout for overseas oil and gas assets was working well.

"No, I don't think so," said Petroleum and Natural Gas Minister Murli Deora when quizzed about a reported move to separate OVL from ONGC.

Petroleum Secretary M S Srinivasan said: "nothing (to this effect) is under consideration. The existing arrangement is working very well and we have no division of opinion on this."

Finance Minister P Chidambaram is reported to have suggested that OVL raise its own resources for acquisition of oil and gas assets abroad, instead of the present practice of borrowing money from ONGC.

To this, the petroleum ministry has stated that OVL derives a lot of strength from being part of India's most valuable firm and the country's second highest profit making entity. "The matter was closed after this clarification," a source privy to the discussion said.

Deora's predecessor Mani Shankar Aiyar had mulled the takeover of ONGC's international arm, OVL, and converting it into the national exploration and production flagship for investments overseas.

OVL, which has committed over $4.5 billion (about Rs 19,800 crore) in 14 countries on the strength of its parent firm, is fully owned by ONGC.

Aiyar's idea was shot down by his bureaucrats, the source said. Ministry officials feel OVL was best in the hands of ONGC as it cannot survive without the strength of ONGC's balance sheet and its brand name.

Sources said OVL was on the verge of being shutdown few years ago as many in government thought it was "worthless."

However, ONGC resisted the move and transformed it from a little known firm in India to a household name in the global oil industry.

The success of OVL, which today has presence in Australia, Cuba, Egypt, Iran, Iraq, Ivory Coast, Libya, Myanmar, Nigeria, Qatar, Russia, Sudan and Vietnam, in past 5-6 years has led to other public sector oil firms - most notably Indian Oil Corp and GAIL (India) Ltd - demanding a share in the OVL spoils or a permission to float their own foreign arm.

Initially, the ministry was mulling over the option of OVL being restructured on the lines of Petronet India Ltd, jointly owned by the public sector oil firms instead of ONGC's sole ownership.

Under this model, the restructured OVL was to jointly acquire an asset with a principal state enterprise. After the acquisition, a joint venture was to be formed dedicated to the project.

But this model was rejected as it would have made the new firm a possible hostile takeover target and would have led to possible disputes regarding rights and obligations of participating companies, sources said.