KOLKATA (miningweekly.com) – The Indian government is unlikely to push for a listing of ONGC Videsh, the wholly-owned overseas arm of the government’s oil exploration and production (E&P) major ONGC, given the current depressed international oil and gas prices.

Neither the Natural Gas Ministry nor parent company ONGC were keen to push for a listing of ONGC Videsh, fearing poor response and valuations of its equity flotation from domestic and foreign institutional investors, a senior official in the Ministry said on condition of anonymity, as he was not authorised to comment before informing market regulatory authorities.

However, he said ONGC Videsh would be granted greater management autonomy, including allowing the board of directors to take decisions on overseas investments up to $1-billion without prior approval from government.

Greater financial autonomy was considered essential if the country’s largest overseas investors in the oil and gas sector were to play an effective role in achieving the Indian government’s goal of “aggressive oil diplomacy and higher oil equity in assets overseas at a time when valuation of such assets were favourably lower”, the official said.

At present, ONGC Videsh was hamstrung in moving to rapidly conclude overseas mergers and acquisitions, as any capital expenditure above $48-million mandatorily required approval from the federal government.

To date, ONGC Videsh had invested an estimated $23-billion in acquiring interests in overseas oil and gas assets and, together with its parent company planned to step up such investments to around $171-billion by 2030, backed by the government’s "oil diplomacy" with countries such as Russia, Iran, Mexico, Vietnam, Mozambique and Venezuela leveraging India’s bilateral relations with these countries, the official added.

It was pointed out that, even without the option of raising funds through the fresh flotation of new equity, ONGC Videsh had the favourable option of raising funds through dollar- or euro-denominated bonds and, since expected revenue streams from investments overseas would be in dollar denominations, it would act as a hedge against a weakening Indian currency.

A similar option was exercised by the E&P company when it raised €525-million to part fund its 16% equity stake in Mozambique’s Rovuma Area 1 gas asset last year.

Overall, the company had been successful in raising an estimated $2.23-billion through sales of bonds to European and Asian investors to fund acquisitions and this would continue to be the preferred option to ramp up its overseas interests.

At the same time, if India’s average imported oil basket costs continued to remain below $50/bl, the country’s savings on the import bill had been estimated to be around $60-billion a year and the government could work out a mechanism to divert part of the savings to fund the capital expenditures of E&P companies rather than meet the revenue deficits of the government, the official said.