ONGC mulls JVs for expansion

JVs will take up retailing and acquisition of vessels, tankers

Oil and Natural Gas Corporation (ONGC) is planning a major expansion by setting up two joint ventures to assist it in its downstream operations and in the acquisition of modern vessels, tankers and aircraft.

While ONGC Values Limited (OVaL) will take care of the entry barriers in the marketing operations of ONGC, the proposed ONGC Peripherals Limited (OPaL) will ensure sustained availability of cost-effective, operationally efficient and technologically advanced vessels, tankers and aircraft maintained by professionals.

In a presentation to Petroleum Minister Ram Naik, the Chairman and Managing Director of ONGC, Subir Raha, pointed out that the corporation was facing a large number of problems in entering the marketing of petroleum products.

The major among them were the lack of manpower to handle the marketing operations and the scarcity of land in urban areas to set up retail outlets.

He said since the corporation could not afford to recruit fresh graduate trainees and build them up for 15 to 25 years to take up the marketing operations, OVaL would enable the company to recruit skilled and experienced executives (employed as well as retired) at market-oriented compensation benchmarked to the practices prevailing in its subsidiary, Mangalore Refinery and Petrochemicals Limited.

OVaL will also help ONGC purchase or lease sites for outlets and depots at market-related prices. This implies that for these sites, the corporation may even pay premiums over government valuations.

Regarding OPaL, Raha said ONGC owned 38 vessels and chartered more than 90 vessels, excluding rigs. ONGC vessels are operated under operation and maintenance (O&M) contracts. It owns three and charters more than 15 helicopters.

Operating expenses on the use of barges and ships for the operations relating to survey, supply, support, services, security, production, construction and transportation exceed Rs 1,000 crore every year.

He said ONGC's operations were expanding fast because of largest-ever offshore service, deep-water exploration and development of three new fields.

However, the corporation has been facing problems because the right of first refusal is available to the owners of vessels and aircraft of Indian registry assuring them of contracts by matching L-1 prices.

The CMD said since ONGC's performance was dependent on assured and sustained availability of cost-effective, operationally efficient, technologically modern vessels, tankers and aircraft maintained by professionals, OPaL is envisaged to take care of these constraints.

OPaL is expected to assist the corporation in the induction of professionally skilled and experienced persons and in the acquisition of modern fleet, improve fund management and profitability, and provide safety, reliability and adequacy.

Raha made it clear that though OPaL will not have exclusive right on ONGC's business, it will provide ONGC the choice of on-and-off balance sheet financing as required.