Oil and Natural Gas Corporation on Thursday said its energy trading joint venture with steel magnet Lakhsmi Mittal will be merged with their exploration tie-up, but did not tell why it failed to make equity contribution in the venture.
ONGC had in 2005 formed two joint ventures with Mittal - ONGC Mittal Energy Ltd for acquisition of oil properties and ONGC Mittal Energy Services Ltd for trading and shipping of oil and gas, including liquefied natural gas.
“The co-promoters have since mutually decided to collapse OMESL into OMEL, with a view that any trading and shipping activity in the future can be undertaken through OMEL itself,” ONGC said in a statement.
It said OMESL was to trade and ship oil and gas, primarily those produced from properties owned by OMEL. “While OMEL is currently having a producing oil asset in Syria and exploratory blocks in Nigeria, OMESL has been a dormant firm as the co-promoters mutually consented not to pursue purely trading and shipping activities,” ONGC said.
ONGC, however, did not say it had not contributed its share of $5 million towards equity of OMESL and the company had survived till now only on Mittal’s equity share.
Also it did not say that Mittal had in August 2006 written to the Government against ONGC’s attempts to derail the venture.
A source in ONGC board said the new management did not want to pursue the venture after the exit of its flamboyant chairman Subir Raha in 2006.
Though ONGC said the decision to merge the two companies was jointly taken by ONGC and Mittal Investment Sarl, the holding company of Mittal family, the statement only mentioned ONGC’s board giving clearance to the proposal at its meeting on October 29.
“The regulatory requirements for merger of OMESL with OMEL would be completed in due course,” it said. “The decision to merge the two separate JVs into one entity are only for convenience of regulatory compliances and management in a more effective manner.”
ONGC Videsh, the overseas arm of the state-run firm, had 49.98 per cent stake in OMEL, while ONGC directly held 49.89 per cent in OMESL. Mittal Investment Sarl held 48.02 per cent stake in each and the balance was with SBI Caps.
Sources said OMESL was left with almost no employee after its CEO S K Sharma moved to Mittal Investment two years ago before quitting in September 2008.
“What is left to merge? The company did not transact any business ever. Probably, they want to merge the papers left,” a source said.
OMESL was folded up because it could not get business anywhere. OMESL offered to export petroleum products from Mangalore Refinery, a subsidiary of ONGC, directly to the customers but the process did not move beyond the initial registration for receiving tenders.
Other state-run firms like Indian Oil refused to even register OMESL citing lack of experience.