Amid reports that GAIL (India) may be split into marketing and gas pipeline verticals, Indian Oil (IOC)—which has shown interest in acquiring the gas utility—reckons that either divisions or the total business of GAIL offers synergies for the oil marketing company (OMC).
“Whatever plans GAIL has in future in terms of expanding infrastructure, we can do that and there is a possibility of integration to execute the plans faster. That is the advantage when it comes to infrastructure as we have the strongest petroleum pipeline in the country. In terms of marketing, we are already sourcing and supplying gas, and our refineries themselves are large consumers of gas. So even when it comes to marketing we have synergies,” said IOC chairman Sanjiv Singh.
Petroleum minister Dharmendra Pradhan last month had said GAIL should concentrate on creating gas infrastructure in the country as marketing can be done by other companies as well. Meanwhile, Pradhan informed Parliament last week that IOC and Bharat Petroleum Corporation have shown interest in acquiring GAIL.
Singh, however, clarified that any company, apart from GAIL, which is in the pipeline infrastructure and gas business makes sense for IOC. “We can have common ROUs (right of use) with gas pipelines as we are a known company of pipelines. If we look at retail business, we are basically a marketing company. We have the customer base,” he said.
IOC has around 13,000 km of pipelines across the country and is the largest retailer of petroleum products.
Finance minister Arun Jaitley had last year in his Budget speech had said that the government will be creating ‘oil major’ in the country which will have the wherewithal across the petroleum value chain. Following the announcement, national oil explorer ONGC acquired Hindustan Petroleum Corporation last month and the combined entity will have presence in both upstream as well as downstream businesses.
According to Singh, any OMC will have synergy with GAIL. “Looking at capabilities of IOC, it is probably the best match for any marriage of this kind. But this is not to deny other companies do not offer value for a deal with GAIL,” said Singh, adding that joining hands with GAIL will enable the entity to offer better services for customers.
Talking about a possibility of a similar deal with Oil India, Singh said while the explorer also offers synergies given IOC has some limited upstream aspirations and it wants to have some crude and gas production coming from within, GAIL makes batter sense because its basket is very wide.
“Also, say if oil get a little disrupted in the future, gas and other form of energies are the possible game-changers. We have more aspirations with gas and the business offers more opportunities in the future,” Singh added.