These are: Completion of the report by the UK-based Gaffney, Cline & Associates (GCA) on a possible revival of Bombay High; implementation of the restructuring exercise in ONGC now being done by international consultants, McKinsey; and an improvement in the value of the ONGC scrip to show its true worth after the recent crossholding of equity with Indian Oil Corporation.

While officials of the Disinvestment Commission could not be contacted for their comments, top sources in New Delhi said that the government is also of the view that it makes little sense to consider offloading its stake in ONGC which is presently 96 per cent.

GCA are reservoir engineering consultants based in the UK, and are presently working on a detailed mid-life review of Bombay High. Output from the field has been threateningto dip to alarming levels in the future and the GCA mandate is to ensure that further work in exploration and production can be done at reduced costs. The consultants also believe that Bombay High has the potential to yield oil till 2050.

The final GCA report will be submitted in a year, and in the experts' view, would be of enormous help to investors keen on participating in an ONGC disinvestment programme. If the GCA feedback is positive, it would logically translate as optimism on the potential of Bombay High and will be good news for the ONGC scrip.

The McKinsey exercise is also a significant value-added input as the consultant is likely to recommend hiving off of some divisions of ONGC as separate profit centres. These include drilling, consultancy services etc, and the revenue accruing here will translate into more revenue in the ONGC books.

The Disinvestment Commission's views on sending the right message to investors on the crossholding deal with IOC are significant as this has come in for a lotof flak. Sources say that the two PSUs are to blame partially because they did not explain the benefits of this equity swap to their shareholders. Now, the fact that they have actually decided to work together in specific projects relating to power, exploration and refining is a clear indication of their keenness to promote India's first integrated oil company.

"These are the inputs required before any divestment programme for the ONGC is considered by the government. It is the only way to maximise revenue from any sale of equity," sources said. Given this background, any such plan for ONGC will at least take two years before it is off the ground.

INSIGHT
Tempting times

Drop in oil production over the years at Bombay High has adversely affected ONGC's performance. It is thus understandable that the divestment commission has asked the government to wait till such time the production from the biggest oil reservoir is revived. Similarly, the McKinsey report will involve hiving offdrilling, consultancy services etc, of some ONGC divisions as separate profit centres.

These measures if implemented will be naturally reflected in the srip price, which should yield the government a better price. However, these measures will take time to implement. Considering the poor fiscal position of the government and the current scrip price, the government might be tempted to sell a part of its stake.

Shishir Asthana