ONGC may acquire HPCL in $6.6 bn deal to form new firm

Following up on Finance Minister Arun Jaitley’s Budget announcement of creating an integrated oil company, India’s biggest oil and gas producer ONGC may buy all of the government’s 51.11 per cent stake in Hindustan Petroleum Corporation Ltd (HPCL). This will have to be followed by an open offer to acquire additional 26 per cent from other shareholders of HPCL. “The government is looking at creating an integrated oil company and the idea is to merge an oil producer with a refiner,” a top source said. There are only six major companies in the sector – ONGC and Oil India Ltd being the oil producers, Indian Oil Corp (IOC), HPCL and Bharat Petroleum Corp Ltd (BPCL) in refinery business and GAIL in midstream gas transportation business. 

The rest such as ONGC Videsh, Chennai Petroleum Corp (CPCL), Numaligarh Refinery Ltd and Mangalore Refinery (MRPL) are already subsidiaries of one of these six PSUs. “So, the options are very limited. One option is to merge refiners HPCL and BPCL with ONGC and merge IOC and OIL. Now this would  create two large vertically integrated oil companies,” he said.