Oil India said that the company and Numaligarh Refinery (NRL) can benefit from optimisation/ further improvement of feedstock supply and crude processing at the refinery. The state-owned hydrocarbon exploration and production company said that the acquisition of majority shares of NRL is not only a strategic business decision but one of the defining moments of OIL’s corporate journey as an E&P Company looking for vertical integration in the oil & gas value chain.
OIL said, "The acquisition is likely to partially mitigate the effect of the volatility of crude price cycle due to diversification of cash flows, reduce earnings volatility and enhance shareholder value. At the same time, NRL also now has become part of an integrated energy company and together OIL-NRL can create a tremendous synergy that will help both the entities to consolidate their business plans and achieve sustainable growth and success in all their endeavours."
Last month, BPCL sold 61.65% holding in NRL to the Oil India- Engineers India consortium and Govt. of Assam.
For NRL, Engineers India paid Rs.700 crore for 3.21 crore shares while OIL bought 39.84 crore shares for Rs. 8,675.96 crore. The remaining 2.29 crore equity shares held by BPCL have been purchased by the Government of Assam for Rs. 500.00 crore.
As per the regulatory filing, the OIL-NRL Synergy involves:
1. OIL is the primary source of crude oil for NRL. Annually, OlL supplies around 2,000 TMT of crude oil to Numaligarh Refinery, which is 67% of NRL’s requirement. Further, the amount of crude oil supplied by OIL is around 60% of indigenous crude produced by the Company in North East. Both the companies can benefit from optimisation/ further improvement of feedstock supply and crude processing at the refinery.
2. OIL produces around 7-8 MMSCMD of NG in the North East, out of which around 1 MMSCMD is supplied to NRL.
3. OIL is currently operating the Naharkatiya-Barauni crude pipeline as well as the Numaligarh-Siliguri Product Pipeline.
4. NRL is executing a cross-country crude pipeline of 1630 KM in length which will traverse through 5 states (Odisha, West Bengal, Jharkhand, Bihar and Assam). OIL’s expertise in execution and operation of pipelines can be shared in the development of the same.
5. NRL has already ventured into upstream oil exploration partnering with OlL as the operator in two oil blocks (Namrup and West Mechaki). NRL has earmarked an investment of around Rs.90 crore in these two blocks.
6. NRL has ventured into the production of value-added food-grade wax, food-grade hexane and exploring possibilities for developing other niche chemicals like furfural alcohol, biodegradable plastics etc. NRL can leverage OIL’s international presence and explore export markets for such products.
7. OIL and NRL are partners in several other joint ventures in related businesses. The synergy will enable further consolidation of the OIL-NRL group in such JVs.
8. OIL and NRL are also the promoters, 20% shareholding each in Indradhanush Gas Grid Limited (IGGL) where the company will be setting cross-country NG Pipeline connecting all the state capitals of North East.
At around 2.44 pm, Oil India was trading at Rs117.70 per piece higher by 2% on Sensex.