Goldman Sachs' controversial note on corporate governance in Oil and Natural Gas Corp (ONGC) that evoked a strong reaction from the company, is not the first instance of the US investment bank having a run-in with the state-owned firm.
In 2005, the then Petroleum Minister Mani Shankar Aiyar had accused Goldman of "lack of propriety and transparency" in presiding over an auction of a Kazakhstan oil firm.
Aiyar had alleged that ONGC and its billionaire partner Lakshmi N Mittal's $3.98 billion bid was the highest when the bids for PetroKazakhstan closed on (Friday) August 19, 2005. But Goldman allowed China National Petroleum Corp (CNPC) to revise its bid to $4.18 billion in the following days and sale was announced before office hours on (Monday) August 22.
Unlike the Chinese, Goldman did not allow ONGC-Mittal to revise its bid for Kazakhstan's third largest oil producer, he had alleged then.
Yesterday, Goldman had stated that Government, as promoter of ONGC, had taken $20 billion in cash from the company over last six years without consulting minority shareholders.
ONGC Chairman R S Sharma took strong objection to the terminology used by Goldman for the discounts it gave on crude oil sold to state-run refiners so that they could sell fuel at subsidised rates. The company is even considering legal action.
Sharma denied compromising on corporate governance. "We give corporate governance utmost importance. At no point ONGC has compromised on corporate governance issues."
He said the decision to give out subsidy on fuel is taken after deliberation at board and Government was justified in asking for such discounts as unlike global peers, ONGC does not have a production sharing regime with the Government on oil and gas it produces from fields given to it on nomination basis.
Under production sharing regime, companies share a fixed percentage of oil and gas they produce with the Government, who is the owner of the mineral resource.
ONGC stocks plunged two per cent on Goldman comments on its corporate governance.
"Since 2003-04, the promoter (Government, which owns a 74 per cent stake) has taken away cash from the company on a quarterly basis for subsidising loss-making state-owned downstream companies. So far, ONGC's promoters have taken cash of almost $20 billion from the company without consulting the minority shareholders," Goldman had said.
"Despite repeated objections raised by investors and more recently by independent directors on ONGC's board, there has not been headway on this issue," Goldman said. "The market appears to have got used to this practice by ONGC promoters, while similar issues in privately run companies would likely cause serious concern."
