Failure to get a suitable buyer for Prize Petroleum is believed to be main reason.
With only ‘small players’ expressing interest in picking up 50 per cent stake in Prize Petroleum Company Ltd (PPCL), the exploration and production (E&P) arm of Hindustan Petroleum Corporation (HPCL), the state-run company may look at merging PPCL with its internal exploration and production arm, HP E&P.
“HPCL has given a deadline of March 2011 to PPCL. HPCL is not happy with PPCL’s performance. There is a thinking in the management that it does not make sense to have two different entities looking at the same portfolio and merging them is the option,” a senior HPCL official told Business Standard.
He said the HPCL management would take a call on PPCL’s future by early next year. M R Pasrija, managing director of PPCL, refused to comment.
HPCL has a 50 per cent stake in PPCL while ICICI Bank and ICICI Venture Funds own 35 per cent and 10 per cent, respectively. HDFC holds the rest. In November, PPCL invited bids for selling the stakes of ICICI and HDFC.
Company officials said they were yet to receive a bid from a company with credible exploration and production record. Five companies, including little known Swan Energy (earlier Swan Mills) and a Gujarat-based non-exploration company, have so far submitted bids.
“If PPCL fails to find a good buyer, HPCL may have no option but to buy the entire stake,” the official said. According to him, though PPCL has been in business for 12 years, it is still an unsuccessful company. He said the company, at present, had only one service contract from Oil and Natural Gas Corporation on the Cambay Basin Offshore fields, which was not yielding much value.
About two years ago, PPCL was in talks with steel magnate Lakshmi Mittal, Essar Oil, Larsen & Toubro and Jaiprakash Associates for a possible 50 per cent stake sale. The talks, however, did not fructify.
HPCL through HP E&P forayed into the upstream sector to have an access to equity oil to ensure energy security. The company, on its website, says it plans to invest around Rs 2,250 crore in the upstream sector during the Eleventh Five Year Plan.
HPCL, in consortium with other E&P partners, has 19 blocks in India, one block in Australia and two blocks in Egypt.
In the absence of any promising hydrocarbon discovery, HPCL and consortium of Oilex of Australia, Videocon Industries, Gas Authority of India (GAIL) and Bharat PetroResources have already relinquished an exploration block in Oman.
