IOC is already in negotiations with ONGC for entering into a long-termmarketing arrangement after the deregulated era and "we hope to finalise theagreement at the earliest," director, marketing, IOC O N Marwaha told PTI.The two corporations had already set up a governance committee to work outthe arrangements of crude marketing by IOC after 2002, besides equityparticipation by ONGC in IOC's petrochemical, power and other projects.

"We presently have a total refining capacity of 32 million tonnes. Thecorporation is planning to attain a refining capacity of 88 million tonnesby the end of the Tenth Plan period for which the crude of ONGC could beused," he said.

If the deal materialises, IOC would have the sole marketing rights of about25 million tonnes of ONGC crude production, Marwaha said, addingnegotiations with the exploration major was at an advanced stage.

Both the companies are also exploring possibilities of jointly bidding foroil equity abroad, Marwaha said. Both IOC and ONGC had reached a broadunderstanding on five issues as part of the strategic alliance between thetwo oil giants including ONGC's in-principle agreement to participate in theRs 8,000 crore Paradeep refinery of IOC in Orissa to the extent of 20-24 percent.

Following the 10 per cent cross-holding acquired by the two companiesearlier in 1999, IOC and ONGC have agreed in-principle to accord amost-favoured customer treatment and the two are negotiating on terms forthe marketing arrangement.

IOC, which currently has a market share of 55 per cent, would also beentitled to market ONGC's production of LPG and other petrochemical productsto national oil companies and host of other industries through itsprocessing complexes.

An agreement with ONGC would help IOC procure about 12 lakh tonnes of LPG,over five lakh tonnes of ethane and propane about two lakh tonnes ofkerosene and other products, giving it an edge over the other refineriesmainly in terms of transportation costs, corporation sources said.

The corporation is also in talks with Gas Authority of India (GAIL) forexclusive long-term LPG marketing rights, company sources said.

The offer is akin to be made by IOC to ONGC for the entire production ofcrude and petroleum products, corporation sources said and pointed out thatit was part of the strategy to retain the market dominance by the navratnaoil company.