“The acquisition of OMPL (ONGC Mangalore Petrochemicals Ltd) by MRPL is the first step towards consolidation of our downstream business. The next step would be an HPCL-MRPL merger,” points out Shashi Shanker, Chairman and Managing Director of ONGC. MRPL held a controlling stake of 51 per cent in OMPL, while ONGC held the remaining 49 per cent, which has recently been transferred to MRPL to make OMPL its 100 per cent subsidiary.

“The OMPL-MRPL merger will result in an improvement in co-operation between the two companies on issues such as product supply sharing,” says Mr Shanker. He elaborates, “The consolidation and integration process is also in keeping with the government’s intent to create an integrated oil major and to enhance the capacity of oil PSUs to bear higher risks, avail economies of scale, take higher investment decisions and create more value for stakeholders.”

ONGC SUBSIDIARIES

Both HPCL and MRPL are listed oil refining subsidiaries of ONGC wherein its equity holding is 51.57% and 71.63% respectively. HPCL’s current operational capacity is 15.8 mmtpa at Mumbai and Vizag. HPCL also owns and operates the largest lubricant refinery with a capacity of 335 tmt and accounts for over 40% of India’s total lube base oil production. Interestingly, it holds an equity stake of 16.96% in MRPL. Another refinery of 11.3 mmtpa (scalable upto 18 mmtpa) set up by HPCL in Bathinda, Punjab is a joint venture with Mittal Energy Investments Pte Ltd of steel tycoon LN Mittal and is known as HPCLMittal Energy Ltd. Both partners hold a 49 per cent equity in the JV. It is also implementing an ambitious 1.2 mmtpa petrochemicals project at the same place with an investment of Rs 24,000 crore, which is likely to be commissioned in calendar year 2021.

Its new Barmer refinery in Rajasthan (1,80,000 b/d) is expected to be completed by 2023. It is a joint venture project with the government of Rajasthan and will be operated under a JV called HPCLRajasthan Refinery Ltd. Likewise, MRPL is located north of Mangaluru city with an oil refinery of 15 mmtpa capacity and a big petrochemical unit capable of producing 0.905 mmtpa situated in the adjacent Mangalore SEZ. MRPL also has a 50:50 joint venture with Shell Gas BV (Shell) for marketing of aviation turbine fuel (ATF). The proposed MRPL-HPCL merger, likely to materialise later this calendar year, will create a giant entity with a combined operational refining capacity of 30.8 mmtpa (capacity underway is separate). This would change the dynamics for shareholders and stakeholders of both companies and lead to better resource management.