ONGC joins hands with LN Mittal
The bringing together of India's most profitable company, and the country's richest citizen, to bring some steel into India's quest for energy security, has been correctly called "pathfinding".
It all started in early June, when Oil Minister Mani Shankar Aiyar, probably frustrated with India's inability to bag anything of substance in Kazakhstan, called up LN Mittal to ask him if he could use some of his clout in Kazakhstan for the purpose. Rightly so because, "Mittal commands tremendous goodwill in the Kazakh establishment for resuscitating the Temirtau area after taking over and turning around the sick steel complex there in 1995."
Mittal might or might not have had a hand in Kazakhstan offering India a stake in one of two medium sized blocks some time in May, but Mittal showed his business acumen by converting call into a business opportunity.
So sometime this weekend, two MOU's will be signed by Mittal International Sarl, a Luxembourg-based subsidiary of flagship Mittal Steel. The first will be signed with ONGC, and will for setting up a company called ONGC-Mittal Services Ltd. This company will invest in projects for trading and transporting oil and gas. The second will be with ONGC subsidiary, ONGC Videsh Ltd, and will be for setting up a company called ONGC Mittal Energy. This one will invest in overseas oilfields.
ONGC will hold 51% in both companies, and they will be registered in some European tax haven - possibly Luxembourg again?
Incidentally LN Mittal is not the only private infusion of strength for ONGC's forays. While Mittal provides strength to Indian forays in Central Asia, the Khemkas of Russia's Sun Group could be roped in similarly for Russian projects, while a deal between ONGC and Reliance back home, has been in the works for a while.
The Synergy for Energy committee meanwhile has suggested Oil India Videsh Ltd. The committee had also rejected the idea of public sector oil monopolies, here is a small "myth-buster" on the purported evil of monopolies.
Despite the recent hike in petrol and diesel prices, international prices have been keeping up the pressure, as result of which oil companies are likely to ask the government for a hike in prices again. Under-realization has reached Rs 3 and Rs 5.30 per litre of petrol and diesel respectively, and the subsidy burden is mounting. Petrol prices in India are already higher than in Nepal, Bangladesh and Pakistan.
An informative interview with India's director-general of hydrocarbons (DGH), V K Sibal. He further reinterates that India remains largely unexplored with huge opportunities. True. Tiny Cairn through its finds in India so far stands to make £82bn at current oil prices.
The award of blocks under NELP-V will be done by July 31st, pending a Cabinet clearance.
There is some traction on the policy front. Apart from the possibility of converting the DGH into an upstream regulator, the Prime Minister also set up the Energy Coordination Committee to guide energy policy. Here is why it should not be dsimissed as “yet another committee”.
While India and Myanmar explore a bypass to Bangladesh, that country remains keen to milk India by getting involved.
Friday, July 22, 2005
ONGC joins hands with LN Mittal