IOC and ONGC to Form Strategic Alliance
The premier upstream and downstream oil companies of India, Oil and Natural Gas Corporation and Indian Oil Corporation are collaborating in a strategic alliance to form a national oil entity which will have all the characteristics of a vertically integrated oil major of global standing. The alliance will help pool the considerable resources of both the companies to enhance national oil security and accelerate growth in national and international operations.
The Government of India had announced the program of phased deregulation of the Indian hydrocarbon industry on November 21, 1997. Immediately thereafter, a dialogue was initiated between the two companies at the highest level for collaboration. A team of Directors was constituted to work out a detailed framework, followed by consensus among the functional directors of both the Boards. The two companies then approached the Government to enable them implement the alliance.
While almost all oil majors in most countries are vertically integrated through upstream, natural gas, downstream and petrochemicals, the PSEs in India are segregated in each sector. This was also the case in China where this has since been corrected through structural reforms. During the process of reforms in the mid-90s, India focused on pricing while China focused on structure. CNPC, the upstream company and Sinopec, the refining and petrochemical holding company of China have been reorganized into integrated oil companies through mutual transfer of downstream and upstream assets. The IndianOil-ONGC strategic alliance will be able to synergize the wide spectrum of core competencies of both companies and operate in areas from "drilling to dispensing."
ONGC is the highest profit making organization in the country and second in turnover after IndianOil. It owns and operates 10 of the country's 15 largest oil and gas fields and accounts for about 85 to 90% indigenous production. Similarly, IndianOil is the largest organization in the country in terms of sales and second in profits after ONGC. It is the country's only Fortune 500 company and owns and operates 7 of the country's 15 refineries with capacity share of about 45% and meets 55% of the petroleum products consumption in the country.