.jpg?downsize=773:435 "Budget 2017: Government Plans To Consolidate State-Run Oil Companies")
Finance Minister Arun Jaitley in his Budget 2017 speech said the government plans to integrate state-run oil companies, a move that could help meet the country's growing energy demands.
Integration would enable government-owned oil companies to take high risk, avail economies of scale, invest more in infrastructure and create more value for shareholders. A consolidated oil giant will be able to match the performance of international and local private companies, Finance Minister Arun Jaitley said in his Budget 2017 speech.
India is said to overtake Japan as the world's third-largest oil consumer and will be the center of global growth through 2040, according to the International Energy Agency.
State-run oil companies in India include Oil & Natural Gas Corporation Ltd., Oil India Ltd., Indian Oil Ltd., Bharat Petroleum Corporation Ltd. & Hindustan Petroleum Corporation Ltd.
India's upstream production is dominated by Oil and Natural Gas Corp., which operates independently of the biggest refiner, Indian Oil Corp. Bharat Petroleum Corp. and Hindustan Oil Corp. are the two other state-owned refiners, while Oil India Ltd. is a smaller oil and gas producer.
RS Sharma, former managing director of ONGC, believes that consolidation of all upstream, midstream and downstream oil companies will be a game changer.
Upstream companies get the wells drilled and produce crude, midstream firms transport the oil and the downstream players process the crude and sell it in open market.
The consolidation could create value for shareholders, depending on the execution.
It is a positive move, but will depend on how it is executed.Jal Irani, Senior VP, Edelweiss Financial Services.
India is following in the footsteps of China. In 2016, China had also stated its intentions to merge Sinochem Group and China National Chemical Corp. to create an oil giant.
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