Oil and Natural Gas Corporation has purchased a controlling stake of fellow state-owned entity Hindustan Petroleum Corporation Limited, India’s largest supplier of base oils.
On 1 February, ONGC acquired a 51.1 percent stake in HPCL from the government through a cash purchase of approximately 778.8 million equity shares at the U.S. $7.40 per share.
“The transaction is in furtherance of the government’s objective to combine various central public enterprises to create an oil major which is able to match the performance of international and domestic private oil and gas companies,” ONGC said in a January 20 press release.
Observers were divided on whether HPCL will maintain status quo as one of the most prominent players in India’s lube market despite the ownership change.
“The deal is a win-win situation for ONGC,” said a senior official in the lubes division of another state-owned enterprise, Indian Oil Corporation Limited.
“HPCL produces a significant amount of base oil and owns the biggest lube refinery in India.”
HPCL’s 480,000 metric tons per year refinery in Mumbai produces primarily API Group II base oil, along with smaller volumes of Group I and Group III, according to Lubes’n’Greases’ Guide to Global Base Oil Refining. India’s other base oil refiners are state-owned oil firms Bharat Petroleum Corp. Ltd., Indian Oil Corp. Ltd., and Chennai Petroleum Corp. Ltd., operator of the country’s second-largest base oils unit, a 270,000 t/y Group I facility in the southern state of Tamil Nadu.
“If we take into consideration base oil, HPCL is the number-one lube marketer in the country, whereas IOCL is number one in finished lubes,” said the spokesman, requesting anonymity. “Currently, ONGC is not in the lubes business. ONGC will gain access to the lubes business and marketing network of HPCL and will gradually emerge as a major player in the lubes market.”
Others believed the impact will be minimal. “It is too early to speculate on the deal’s impact on the lube business,” an HPCL lube business spokesman explained.
“As of now, HPCL will remain a separate entity post-stake sale, and we hope to enjoy the same management liberty as before.”
ONGC is India’s largest producer of crude oil and natural gas, accounting for around 70 percent of domestic production.