Mittal, ONGC set to wind up oil and gas trading JV

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New Delhi: Steel tycoon Lakshmi N Mittal and the Oil and Natural Gas Corporation have decided to wind up a firm they had set up four years ago for trading in oil and gas as the joint venture has failed to take off, allegedly due to lack of interest from the state-run firm.

ONGC and Mittal had in July 2005 come together to form two joint ventures - ONGC Mittal Energy Ltd (OMEL) and ONGC Mittal Energy Services Ltd (OMESL). While OMEL picked up a handful of exploration blocks, OMESL, set up for trading and shipping of hydrocarbons, existed only on paper. OMESL, which had barely any employee on its role since S K Sharma quit as the CEO in September 2008, will be first converted into a 100% subsidiary of OMEL and then merged with it, sources said.

A top official at the joint venture, who wished not to be identified, confirmed the decision. Sources said Mittal had never been happy with the progress at OMESL. Apparently, ONGC, after the exit of its flamboyant CMD Subir Raha, was not keen on trading and shipping of oil and gas (including LNG). The state-run upstream firm had not even contributed its share of capital and the company survived only on Mittal’s contribution.

In both OMEL and OMESL, ONGC held 49.98% stake while the Mittal-owned Mittal Investment Sarl had 48.02%. The remaining 2% was with financial institutions.Sources 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 customers but was merely registered to receive MRPL tenders. Other state-run firms like Indian Oil refused to even register OMESL citing lack of experience.

OMESL was to trade in oil and gas produced from overseas properties of ONGC but that business too did not come its way. Frustrated at the lack of progress, Mittal had in August 2006 even written to the government complaining about ONGC’s attitude. But that did not change much as the state-run firm continued to refuse deputation of its employees to even OMEL -the company formed to acquire oil and gas properties abroad.