The team will decide which of these areas require immediate attention by IOC and ONGC. The final report is expected to be submitted during the next 10 days after which some important decisions on working together will be taken. Sources said that exploration & production as also refining & marketing will be given top priority in terms of joint participation while in the case of the other fields, there could be a wait-and-watch attitude.

It may be recalled that IOC and ONGC had also recently entered into a 10 per cent equity crossholding indicating their intentions to work together more closely in the future. Once the Government also announces its intention to privatise the two oil PSUs, there is everylikelihood of a merger happening in the future.

What is of particular interest in the IOC, ONGC alliance is the understanding reached on the pattern of equity investment in joint projects both here and abroad. It has been decided that the lead company for the project, be it IOC or ONGC, will hold at least 26 per cent while offering up to 24 per cent to the other. To elaborate, if IOC decides to get into a petrochemicals venture, it will take 26 per cent while offering ONGC up to 24 per cent. Similarly, where ONGC finalises an exploration venture, it will pick up 26 per cent while IOC will be allowed a maximum 24 per cent.

"The arrangement will ensure that the joint venture does not become a government company and, therefore, guarantee greater flexibility in operations," sources said. Significantly, the second partner with the 24 per cent option is not bound to pick a stake and can always reject it if necessary.

Hence, if ONGC is not particularly convinced about the viability of an IOC-promoted project,it will have the freedom to back out of the venture. The same goes for IOC if it is of the opinion that an ONGC venture is either too capital or risk-intensive and will therefore do well not to participate.

"This is an ideal situation and both companies will have enough breathing space. It is a democratic relationship which will only get stronger in the days to come," sources said. In the event of the second company not participating, the lead partner can increase its stake up to 50 per cent. There would always be room for a third player, from either here or abroad, so long as the venture does not become a Government company.

A beginning has already been made abroad where IOC has identified Mauritius as a potential area for some downstream activities. Here, ONGC will be offered up to 24 per cent and sources say that the company is still evaluating the proposal.

In Russia, ONGC has identified some producing fields where IOC will have the option of going up to 24 per cent in the venture. The greatestbenefit for the two oil PSUs is that this partnership will be an invaluable learning experience in getting key tips on key activities in the oil sector right from exploration to refining and petrochemicals.

It may also be mentioned here that IOC and ONGC have also planned to set up an integrated oil company abroad which will cover the entire gamut of operations right from exploration and production to refining and marketing. The present thinking is to hold 40 per cent each in the venture while the balance could be offered to an international player of repute. Countries like Mauritius, South Africa and Thailand have been shortlised for this project.

ONGC will also participate in IOC's power project at Panipat with a 20 per cent stake where Marubeni and Petronas will hold 26 per cent each. There is every likelihood of this being extended to IOC's plans in petrochemicals in Panipat as also refining in Paradip, Orissa, and Nagapattinam, Tamil Nadu. The latest development is that IOC could replace BharatPetroleum Corporation in the ONGC-promoted paraxylene project in Hazira.

Insight

ONGC has reiterated that it is still keeping its interests alive in the six-million-tonne Bina refinery being promoted by BPCL and the Oman Oil Company. A separate taskforce of the ONGC is reportedly examining the prospects of the PSU picking a stake of up to 20 per cent in the refinery. "Though top priority will be given to those projects promoted by IOC, ONGC maintains that the Bina refinery is an attractive proposition for investment as it will come up in a region where there would be demand for petro products," sources said. A decision to this effect would be taken during the next few months and it is likely that ONGC could still prefer a stake in Bina to an IOC-promoted refinery, they add.