Indian Mega Oil Company Mergers Is Mega Stupidity

Mega-Mergers In Indian Oil Industry

The Indian government plans to merge its massive leviathan oil and gas corporations such as ONGC, OIL and others in order to create integrated oil and gas majors which will not suffer from the vagaries of the oil commodity cycle. ONGC and HPCL merger plans are already being made and other mega-mergers are soon to be announced. I don’t think this is a good idea, in fact, it is a stupid idea for anyone who has worked closely with these government owned slow moving slothful companies. The mega-mergers will create bigger mega sloths instead of lean and mean companies. First of all, it makes no sense for the government to own and run oil and gas companies. Developed nations are doing extremely well without owning companies which are best run in private hands. Companies like ONGC, OIL are slow bureaucratic machines which survive despite their lack of agility and even corruption as they own valuable national resources such as oil and gas fields.

Also, read List of Advantages and disadvantages of Oil.

BPCL Refinery

Private companies such as Reliance run circles around these oil giants as could be seen in the recent KG-D5 oil and gas field off the Andhra coast. There is a court case filed by ONGC that Reliance syphoned off oil and gas from beneath its own field. What is funny is that it took ONGC a couple of years to find this out after it started prospecting through a foreign oil field services company. Other large oil and gas downstream companies such as HPCL, BPCL and IOC have a quasi-monopoly over the supply of fuel through an extensive network of gas stations across the country. These fuel stations are not particularly well run and efficient, and most of these franchises are known for providing adulterated fuel as these companies remain mired in corruption and losses. There is an established network of fraud and corruption as officers in these companies are paid off to look the other way.

Everyone knows what happens with giant oil and gas companies owned by the state. Petrobras which is owned by the Brazilian government is the most famous example of institutional corruption and inefficiency. Procurement contracts of thousands of crores means ample potential for corruption through bribes and nepotism and it does not take a genius to figure out that the same thing is occurring in the procurement of huge tenders by the government-owned Indian oil and gas companies.

Gujarat state-owned company GSPC (Gujarat State Petroleum Corporation) has lost a huge amount of money by spending thousands of crores in trying to drill for offshore oil and gas even where there was none to be found. I don’t think a private company accountable to investors would make such expensive mistakes. Now GSPC is selling its failed field to ONGC which is another inefficiently run behemoth sure to burn more money in a futile exercise.

The solution is simple. Just privatise these companies and let them run and sink on their own. The era of oil is anyway coming to an end soon with the advent of the EV technology and other modern transport forms which do not require polluting stuff.