ONGC spells out recast plan

Seven joint ventures proposed

Aiming to become a $100 billion integrated oil and gas major in five years, Oil and Natural Gas Corporation (ONGC) has proposed the setting up of seven non-government firms to manage its marketing, drilling, LNG, logistics, shipping and petrochemical businesses under a new corporate structure.

ONGC would have a 50 per cent stake in all the seven joint ventures, and the remaining would be offered to financial institutions and a strategic partner specialising in that particular business, the company said in a presentation to the petroleum ministry.

ONGC said the forced separation of regular manpower was not possible and competent and experienced professionals could not be attracted by the PSU's pay structure at middle or senior management levels.

"The only practical solution is to form JVs as non-government companies for specific purposes," the company said, identifying non-core activities with profit potential and new business requiring specialisations as areas for forming non-government companies.

For this purpose, ONGC has proposed a change in the organisation's structure. The corporation's chairman will have a vice-chairman and a managing director responsible for the core business -- exploration and production -- and another vice-chairman and managing director for its overseas businesses (essentially ONGC Videsh Ltd).

Besides the two vice-chairmen responsible for the company's E&P and overseas businesses, ONGC also proposes to have a third vice-chairman responsible for services like drilling, logistics and shipping.

ONGC's subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL) will continue to have a separate managing director, who will be directly reporting to the chairman.

The company proposes to set up a corporate executive committee, similar to board of directors, for corporate business planning, resource allocation and management interface.

Its board will comprise of the chairman and seven whole-time members - three vice-chairmen, three managing directors and a director - besides a nominee director each from the ministry of petroleum & natural gas and the ministry of finance and six independent directors.

While ONGC chairman, vice-chairmen and managing directors would be appointed by the Cabinet Committee on appointments through the Public Enterprise Selection Board, the board would appoint presidents, the presentation said.

The joint venture boards will have only managing directors as whole-time directors and nominees of the major equity partners (more than 10 per cent) will be part-time directors.

"To ensure synergy in business, the ONGC chairman will be the non-executive chairman of all subsidiaries and joint ventures," the presentation said, adding subsidiaries and joint ventures may not be listed to begin with.

CVC's jurisdiction will apply to all ONGC group companies and their accounts are proposed to be subject to the Comptroller and Auditor General's review.

ONGC has proposed that joint venture partners are needed for inducting professional competence. Each joint venture would be a profit centre, the presentation said.

ONGC Values Ltd, a 50:50 JV with FIs is proposed for domestic marketing of all products from ONGC and MRPL, integrated exports and trading for ONGC, MRPL and OVL and manufacturing and marketing of lubricants and specialties.

For well drilling and services, the firm wants to create ONGC Drilling Ltd with private firms and FIs, who together will hold not more than 50 per cent in the JV.

ONGC Services Ltd and ONGC Logistics Ltd, with ONGC owning 26 to 50 per cent stake in each and the rest being with public and private sector firms, are proposed for managing data centres and communication networks, and pipelines. ONGC Logistics will also manage marine and ground logistics.

In ONGC Transforms Ltd, the state-owned firm will have 50 per cent stake and the balance will be shared by private firms and FIs and will handle LNG business and power generation from natural gas.

With a similar equity composition, ONGC Petrochem Ltd will be responsible for the manufacture of petrochemicals, while ONGC Shipping Ltd is proposed for crude, product and LNG shipping.

Splitting business

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• ONGC Values is proposed for the domestic marketing of products from ONGC and MRPL, and exports
• For well drilling, the corporation wants to create ONGC Drilling
• ONGC Services and ONGC Logistics will manage data centres and pipelines, respectively
• ONGC Transforms will handle LNG business and power generation from natural gas
• ONGC Petrochem will manufacture petrochemicals, while ONGC Shipping is proposed for crude, product and LNG shipping