Sources say that the combined strengths of the two navratnas will help offer a range of skilled services. For instance, ONGC has various institutes all over the country that work on specialised areas like exploration, geo-data processing, reservoir studies, drilling, engineering & ocean technology, oil & gas production.

IOC, in turn, has over a dozen training centres that offer specialised programmes in finance, human resource development, business administration and other fields. While the corporation has two premier institutes - Haldia Training Management and IndianOil Institute of Petroleum Management near Delhi, there are many others fordifferent units like refineries, pipelines.

A joint venture will be an attractive option as it has the potential of becoming an important profit centre. ONGC has already acknowledged the importance of its centres and as per McKinsey's suggestions, it has been considering hiving off lucrative operations like drilling. The upstream major also believes that there is enough revenue to be made through each unit by charging independently for services rendered.

IOC, similarly, conducts various advanced programs in specialised fields throughout the year. The company, sources say, has excellent infrastructure which gives it an advantage over other institutes. A fusion of skills of both PSUs will create an entity that will attempt to sew up opportunities both in India and countries overseas.

A beginning has already been made for a specific training program in Bangladesh Petroleum Corporation where the joint venture has been shortlitsed with other companies. A decision is awaited.

IOC and ONGC have also decidedto pool efforts in exploration & production, refining & marketing, petrochemicals and power. The petroleum ministry is, however, of the view that the two oil giants should stick to their core competence of refining and exploration and not diversify into unrelated areas.

"The ministry believes that in the current context of boosting domestic crude output, ONGC should concentrate on exploration and production. There is little need to look at other areas at this stage," sources said. The same view apparently holds good for IOC too where reservations have been expressed for its foray into petrochemicals and power.

The two navratnas have, however, reiterated that such diversification is essential if they need to survive in a deregulated environment. Further, as part of their strategy to become an integrated oil company, it makes sense to build up expertise in key areas both in the upstream and downstream sectors.

IOC has offered to be the exclusive supplier of key petro-products to ONGC once the oil sectoris completely deregulated. These include diesel, lubricants, motor spirit, grease etc which ONGC currently sources from both Bharat Petroleum Corporation and Hindustan Petroleum Corporation in addition to IOC.

The upstream major, in particular, uses diesel extensively for its rigs and this alone could translate into an order book worth hundreds of crores of rupees. A task force has been constituted by both PSUs to examine this proposal and see if it makes economic sense. It will then be forwarded to the ministry of petroleum and natural gas for approval. IOC has also offered to be the exclusive marketeer of all ONGC's products which include crude, kerosene, naphtha, LPG.