News: ONGC not keen on JV with Mittal Steel

(PTI 20/08/2006) New Delhi - Steel tycoon Lakshmi N Mittal may mave muscled the acquisition of European giant Arcelor, but his ambition to make it big in the oil and gas sector is coming unstuck as his partner ONGC appears not keen on a venutre the two had agreed last year.

Mittal last week wrote to the government about delays in setting up the ONGC-Mittal Energy Services Ltd (OMESL), a JV that was to trade and ship oil and gas (including LNG), industry sources aid.

After the exit of high-profile Subir Raha, the brainchild of the project, ONGC has reversed several decisions of the July 2005 memoran-
dum of understanding (MoU).

Sources said ONGC has refused deputation of its employees to OMESL, the company formed to acquire oil and gas properties abroad.

ONGC has also reversed the decision to open an office in Delhi, sources said. The Indian firm cancelled interviews for recruitment to OMESL this month.

The Mittal letter pointed out delays on the part of ONGC to register oil companies with OMESL, a pre-requisite to begin trading in crude oil and petro-products. Frustrated by the delays, Mittal is believed to have begun talking to global giants like Chevron and Exxon Mobil for an oil trading venture.

Soures said ONGC was willing to continue with OMESL, but with a skeletal staff. On OMESL, the PSU’s new management has privately said the oil-trading business does not form its core competence, and would, therefore, prefer to exit from it.

A senior ONGC official said oil trading was an unrelated business activity and as such required parent company guarantees. “Extending parent company guarantees to an unrelated business is something the board will have to decide.”