Mergers, Acquisitions, Alliances and Synergies Case Study

Case Title:

ONGC’s Overseas Merger & Acquisition Strategies

Abstract: Over the years, India had become heavily dependent on imported crude oil. For the growing Indian population and developing Indian industry, the rising cost of crude was becoming a burden. Oil & Natural Gas Corporation Ltd (ONGC) was one of the leading Exploration & Production (E&P) company in India. The domestic competition to ONGC grew after liberalization policy of Indian government in 1991. The government prepared a plan called “India Hydrocarbon Vision 2025” and suggested ONGC to go global. The competition in domestic business and hike in oil prices motivated ONGC to create ONGC Videsh Ltd (OVL) for overseas operations. By 2006, ONGC is present in 14 countries and has 24 ongoing projects.

OVL had set a target of producing 60 Million Metric Tonnes Per Annum (MMTPA) in 2025, but its output in 2006 was only 6.34 MMTPA. Its strategy for expansion was based on three entry methods- (a) wholly owned projects acquired during bidding of oil blocks in different countries, (b) production sharing contracts and (c) participation interests. It had established presence in major oil producing countries like Russia, Qatar, Libya, Iraq and Iran. Even then, the output from major projects was insufficient to support Indian crude requirements. To overcome the limitations, OVL had initiated expansion through acquisition of new projects during 2006.

Pedagogical Objectives:

• To study the Challenges faced by the Indian oil and gas industry and India’s energy requirements
• To discuss ONGC and its role in the Indian crude oil sector
• Merger and Acquisition strategies of OVL.

Keywords :  Mergers,Acquisitions,Alliances Case Study;ONGC; OVL; Oil& Gas Industry in India; Participation Interest; Sakhalin –I project; GNOP; Chinese National Petroleum Corporation; Shell & Petrobras; OMEL; Block 35 & 36 in Cuba; crude oil & natural gas; exploration and production; Million metric Tonne Per Annum of Crude