Mittal will propel HPCL to global orbit: Experts

Hindustan Petroleum Corporation (HPCL), the state-owned company, could find itself becoming a major player in the oil and gas sector both within the country and overseas with huge capital being pumped in by the L N Mittal-promoted Mittal Investments.

Mittal Investments has bought 49 per cent in HPCL's new refinery at Bathinda, Punjab, for Rs 3,200 crore, even as the two companies have joined hands to bid for a refinery and an oil block in Nigeria.

The state-owned oil marketing companies, which also own refineries, have huge debts on their books, and it is difficult for them to raise money for expansion plans. "Mittal will help HPCL raise money for its expansion within the country and overseas," said Rohit Nagraj, research analyst at Angel Broking.

However, the HPCL-Mittal partnership could end up competing against other Indian companies for overseas assets. In fact, the joint venture's first overseas bid for 51 per cent stake in a refinery at Port Harcourt in Nigeria clashes against Indian Oil Corporation's interest for a stake in the same 9 million tonne per annum refinery.

"There is no case of clashing of interests. The government has invited international bids and we are all competing on a level field," said a senior HPCL official, who did not want to be named.

He agreed that Mittal's financials and global presence would help leverage HPCL's global aspirations. "Everyone knows how strong they are in the world market. They are keen to enter the downstream sector and our core competency is refineries," the HPCL official added.

All the oil marketing companies are competing against each other, and it is now spilling over to the overseas market, Nagraj said. "None of the Indian oil companies will be threatened by Mittal's entry into the oil sector in India," he added.

Unlike in the upstream sector, the government has not nominated a nodal national company to venture into overseas downstream projects. In the upstream sector, ONGC Videsh (OVL) is the nodal company which carries out negotiations, while other companies such as Oil India and GAIL India piggy-back on OVL. However, in the downstream sector, all companies have the freedom to compete for assets.

Analysts, are hopeful that the HPCL-Mittal partnership will not go in a direction similar to the partnership between Oil and Natural Gas Corporation (ONGC) and Mittal. In 2005, Mittal had tied up with ONGC to bid for oil blocks in Kazakhstan and Nigeria.

"HPCL is a smaller company compared with ONGC. The Mittals are expected to spearhead the overseas operations in terms of the markets and the financials. HPCL will operate the refineries," the HPCL official said. Also, it is unlikely that the two joint ventures would bid for the same blocks, Nagraj said.