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February 2, 2018

Volume 7 Issue 8

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India’s Base Oil Boss Changes Hands

Oil and Natural Gas Corp. yesterday purchased a controlling stake of fellow state-owned entity Hindustan Petroleum Corp. Ltd., India’s largest supplier of base oils.

On Feb. 1, ONGC acquired a 51.1 percent stake of HPCL from the government through a cash purchase of approximately 778.8 million equity shares at Rs 473.97 (U.S. $7.40) per share.

“The transaction is in furtherance of the government’s objective to combine various central public enterprises … to create an oil major which is able to match the performance of international and domestic private oil and gas companies,” ONGC said in a Jan. 20 press statement.

Observers were divided on whether HPCL will maintain status quo as one of the most prominent players in India’s lube market despite the ownership change, Lube Report Asia found in a series of interviews on Thursday.

“[The deal] is a win-win situation for ONGC,” said a senior official in the lubes division of another state-owned enterprise, Indian Oil Corp. Ltd. “HPCL produces a significant amount of base oil and owns the biggest lube refinery in India.”

HPCL’s 480,000 metric tons per year refinery in Mumbai produces primarily API Group II base oil, along with smaller volumes of Group I and Group III, according to Lubes’n’Greases’ Guide to Global Base Oil Refining. India’s other base oil refiners are state-owned oil firms Bharat Petroleum Corp. Ltd., Indian Oil Corp. Ltd., and Chennai Petroleum Corp. Ltd., operator of the country’s second-largest base oils unit, a 270,000 t/y Group I facility in the southern state of Tamil Nadu.

“If we take into consideration base oil, HPCL is the number-one lube marketer in the country, whereas IOCL is number one in finished lubes,” said the spokesman, requesting anonymity. “Currently, ONGC is not in the lubes business. ONGC will gain access to the lubes business and marketing network of HPCL and will gradually emerge as a major player in the lubes market.”

Others believed the impact will be minimal. “It is too early to speculate on the deal’s impact on the lube business,” an HPCL lube business spokesman explained. “As of now, HPCL will remain a separate entity post-stake sale, and we hope to enjoy the same management liberty as before.”

Market observers concurred with the anonymous HPCL official. “[Kline] does not expect any change or impact on HPCL’s lubricant business post-ONGC stake acquisition,” said Anuj Kumar Singh, project manager of United States-based consultancy Kline & Co.’s energy practice. “We believe that [HPCL] will continue to pursue the lubricant market with the same approach as before to maintain its leading position.”

“Stake acquisition is likely to have the least impact, as it is an exercise to achieve the government’s disinvestment target,” said Priyank Chandra, an analyst for Mumbai-based investment management and financial advisory house, Dolat Capital Pvt. “The government will gain the maximum [benefit] from the stake sale, as it will get cash. There will be no impact on the management or lubes trade of HPCL.”

ONGC is India’s largest producer of crude oil and natural gas, accounting for around 70 percent of domestic production. 

Photo courtesy of HPCL Lubricants

HPCL, acquired by ONGC in January 2018, has lube production and distribution assets spread across the country, including a blending plant in Silvassa.