Jul 25 2005
ONGC Group has established two overseas joint venture companies, with the world’s largest steel group – Mittal Steel. The two Fortune-500 corporate entities are expected to synergise each other’s strengths to promote energy security for India with global resources.
With very limited domestic hydrocarbon resources, securing equity Oil and Gas from abroad is India’s only sustainable option to fuel the growth of its developing economy. This MoU is seen as the beginning of that journey, where the Mittal Group will bring in its clout in the hydrocarbon rich countnries (in Central Asia and Africa) where it operates, to facilitate obtaining equity Oil and Gas.
Two overseas joint venture companies have been established as a result of the MoU inked on 23rd July. Both of these will be registered outside India - in a European Union country - for tax management purposes.
One of the joint ventures is between ONGC Videsh Limited (OVL) and Mittal Investments Sarl (the controlling shareholder of Mittal Steel company N.V. and wholly owned by Mr. Lakshmi N Mittal and family). This Joint Venture – ONGC Mittal Energy Limited (OMEL) - will work to source equity Oil and Gas in various countries.
98 per cent of the equity of this Joint Venture will be held by OVL and Mittal in 51:49 ratio; the balance 2 per cent will be with financial institutions.
The second joint venture, between ONGC and Mittal Investments Sarl, is called ONGC Mittal Energy Services Limited (OMESL). This will for trading and shipping of Oil and Gas (including LNG) sourced through the other Joint Venture. The shareholding patter in this second joint venture will be similar as the first one.
Addressing a Press Conference organized in New Delhi just after the signing of the MoU, Mr. Lakshmi N Mittal told journalists that more than half a dozen countries, where his steel projects are running, have good business opportunities in Oil and Gas. “Our experience in such countries and our exposure to commodity business is expected to help ONGC in meeting the national energy needs”.
The Hon’ble Minister of Petroleum & Natural Gas and Panchayati Raj Mr. Mani Shankar Aiyar said that though the Krishnamurthy Committee has not favoured the merger of Oil PSEs, “the Indian Oil industry wants to fuse the energies of all sectors - public and private, domestic and foreign – for a larger national cause of energy security.”
The Minister said that the coming together of the two giants – the largest corporate in the private sector Mittal Steel and the largest corporate in the public sector ONGC - will help in raising the colossal capital to attain energy security for the country. “Mr. L N Mittal is an unusual Indian who thinks global. Mr. Subir Raha is a visionary manager, capable of thinking out-of-the-box and reaching out to the stars. Given these, I am optimistic about ONGC and Mittal Steel restoring India to the vanguard of global powers.”
Lauding the role domestic E&P companies like ONGC, the Minister said that the Bay of Bengal is a great treasure house of Natural Gas. “However, even in the most optimistic scenario, the country will need to access Natural Gas from abroad, if it wants to grow as per the projections of 8 per cent or even beyond that.”
Additional Secretary in MoP&NG Mr. M S Srinivasan said this synergy between the two titans – ONGC: India’s showpiece to the world and Mittal Steel: the steel-makers to the world – will help India in the global arena while sourcing equity Oil and Gas.
Mr. Subir Raha said that launch of this private public partnership has a crucial message – celebration of India’s entrepreneurship, in India and in the world. “Given the unstinted support and guidance of the Hon’ble Minister and the Government of India and the commitment of both the organizations, I am quite confident that we will be able to take very important and substantive steps forward to obtain energy security for India. So, where we stand today, we look forward to the future with great optimism and confidence in our collective capability and synergy to Make Tomorrow Brighter.”