India sees scope for more integration among state energy companies

India could see more integration among state oil companies, its oil minister said on Monday, following top producer ONGC`s $5.8 billion deal last week to buy a majority stake in refiner Hindustan Petroleum Corp Ltd.

India wants to build bigger oil companies to better compete with global energy giants and withstand oil price volatility through integration of state-run oil firms.

"There is scope for more vertical integration in the sector," oil minister Dharmendra Pradhan told a news conference.

He was speaking after Oil and Natural Gas Corp (ONGC) announced on Saturday that it was buying the government`s 51.1 percent stake in HPCL to create India`s first integrated oil and gas company.

Analysts have said that an integrated oil company would give Indian state-owned firms a bigger balance sheet to compete globally for assets.

Last year state-run refiners Indian Oil Corp Ltd and Bharat Petroleum Corp Ltd separately expressed interest in buying the government`s stakes in explorer Oil India Ltd and gas utility GAIL India Ltd.

ONGC`s purchase of a majority stake in HPCL is expected to close by the end of this month and Pradhan said there was a possibility to combine HPCL with ONGC`s petrochemical projects and its refining arm Mangalore Refinery and Petrochemicals Ltd.

MRPL operates a 300,000 bpd refinery in the southern state of Karnataka.

After the deal, ONGC will control around 17 percent of India`s 5 million bpd or so refining capacity.

HPCL Chairman M. K. Surana said on Monday that there could be a merger between his firm and MRPL to achieve synergy benefits in the refining and petrochemicals sectors, although he noted no discussions had yet taken place.