The panel is believed to have floated a long-term vision of an umbrella entity comprising Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL), Cochin Refineries Limited, Madras Refineries Limited (MRL) and IBP Company. For the immediate future, the committee has regrouped the national oil companies into three major market players, led by Indian Oil, Bharat Petroleum and Hindustan Petroleum Corporation.

The committee recommendations are expected to be referred to the Union Cabinet shortly. The petroleum and natural gas ministry has convened a meeting of oil industry chief executives on Monday to discuss the report, which will form the basis of new alliances and mergers amongnational oil companies.

The meeting will be chaired by petroleum secretary, TS Vijayaraghavan and will be attended by the chairmen of Indian Oil, HPCL, BPCL, IBP Company, MRL and CRL. The four-member panel, headed by former revenue secretary and then Planning Commission member Nitish Sengupta, was set up last year to recommend a survival strategy for stand-alone refineries and stand-alone marketing company, IBP Company Limited.

The committee, which submitted its findings to union petroleum minister, VK Ramamurthy recently, has concluded that stand-alone refineries or marketing companies could not survive in a free market.

It is believed to have endorsed the Disinvestment Commission's recommendation that the Centre retain only a 26 per cent holding in IBP Company and offload upto 33 per cent of its stake in favour of BPCL. The existing Government shareholding in IBP is 51 per cent.

The transfer of IBP equity to BPCL will help demolish its public sector status, but allow it to remain a Governmentcompany all the same. The stand-alone marketing company, could ensure product supplies through five-year commercial agreements with refining companies, endorsed by the petroleum ministry.

The marketing company could, for instance, lift petroleum products from Indian Oil's Mathura and Panipat refineries in the north, MRL and CRL in the south and negotiate product supply pacts with private sector refineries (Essar Oil and Reliance Petroleum) in the west. At the end of five years, when Government controls over the market would have vanished as well, IBP could enter into ``arms length'' arrangements for product supplies. The stand-alone refining companies could all enter into strategic partnerships with industry giant Indian Oil or BPCL. Hindustan Petroleum Corporation seems to have been kept out of the reckoning of the immediate alliances, because the company is growing in its own momentum. Apart from two refineries of its own, HPCL also has a stake in the Mangalore Refinery and Petrochemicals Limited (MRPL)and has recently laid the foundation stone for a refinery at Bhatinda in Punjab. Bharat Petroleum on the contrary, has only one refinery in Mumbai.

The Sengupta committee is believed to have favoured a takeover of the entire Government shareholding in CRL by Bharat Petroleum, apart from the 33 per cent stake in IBP. The company is already committed to market CRL's products. Indian Oil has a similar marketing arrangement with MRL, which the panel feels, should continue. When marketing controls are lifted at the end of 2001, Indian Oil or BPCL could think of picking up the Government stake in MRL as well. Indian Oil has been considered a suitable match for BRPL, since it will be responsible for both supplying crude and evacuating the products of the 2.35 million tonne-capacity refinery. The commissioning of the three million tonne-capacity Numaligarh Refinery will jeopardise BRPL's access to Assam crude, at which point it could become an Indianoil subsidiary and have access to the industry giant's crudepipeline from Haldia. The committee is believed to be in favour of NRL offering a 10% stake to upstream oil company, Oil India Limited, to ensure a steady supply of Assam crude.

Incidentally, BPCL has a 32% stake in the Numaligarh Refinery. The alliances and takeovers should create three dominant PSU market players, Indian Oil, BPCL and HPCL. Even so, the national oil companies would remain pygmies in a world of mega corporations born out of alliances and mergers. The committee has suggested that the strategic linking process could go on at home too, ending in the consolidation of HPCL, BPCL and its allies. The end result will be a holding company with a refining and marketing capacities to match that of Indian Oil's.

At present, Indian Oil has a capacity to process 27 million tonne of crude oil, which will increase to nearly 36 million tonne in a couple of years. It controls 55% of the petroleum products market. The combined refining capacities of HPCL, BPCL, CRL, NRL, MRL and BRPL is 36.85 milliontonne. Hindustan Petroleum and BPCL have a 20% share of the oil market each, while IBP markets the remaining 5% of the petroleum products within the country.

IOC to control strategic pipelines

The chairman of the committee, Nitish Sengupta, has refused to discuss the report on the post-liberalisation strategic alliances in the oil industry. He did consent, though, to place on record the four-member panel's references to the oil pipeline infrastructure necessary after the year 2002. ``It is not correct to say that the committee had recommended pipelines outside the public sector. In a strictly deregulated scenario, it would not be fair to let one player have complete control over pipelines. It will not be a level playing field then.'' ``Except pipelines of strategic importance, Indian Oil Corporation should not mind transferring the other pipelines to Petronet India Limited, in which it is a major stakeholder.''