IOC keeps ONGC-Mittal JV at bay

New Delhi, Sept 29 | Updated: Sep 30 2006, 05:38am hrs
Steel tycoon LN Mittals foray into oil and gas trading business through a joint venture (JV) with ONGC is facing fresh opposition from refiner Indian Oil Corp (IOC), which feels the JV is ineligible to bid for its tenders.

IOC has shot off a letter to the oil ministry, saying that it cannot put ONGC-Mittal Energy Services Ltd (OMESL) on its mailing list for participation in its tenders for import of crude oil/LPG and export of petroleum products as the JV did not have the requisite 3-year experience, a government official said.

For becoming eligible for participation in public sector oil company tenders, a firm needs to have at least three years of international trading business experience and should have handled a thrusthold volume. OMESL set up to provide trading, shipping and terminalling services had taken birth earlier this year.

We cannot break norms for anybody, the official said. A top IOC official said the company had some years ago turned away Reliance Industries Ltd (RIL) for similar reasons. Besides experience, the trading firm should also have parent company guarantees, which could be invoked in case of payment defaults.

But in case of OMESL, the two promoters have agreed to provide only comfort letters, which has been rejected by IOC, the government official said.

The government official said Mittal had last month written to the petroleum ministry over delays in getting OMESL registered with refiners.

The ONGC board on September 6 decided to make application for registration of OMESL only with public sector refiners on the basis of a parent company comfort letter.

In June, a government director on the board of oil and natural gas corp (ONGC) had blocked the exploration firms equity participation in OMESL as the ministry did not want the state-run firm to make huge financial outlays for non-core trading business.

Industry sources said frustrated at the delays, Mittal Steel has signed a preliminary pact with Total of France for cooperation in oil and gas business including trading.