L N Mittal's foray into oil and gas trading business through a joint venture with ONGC is facing fresh opposition from refiner Indian Oil Corp, which feels the JV is ineligible to bid for its tenders.
IOC has shot-off a letter to the Oil Ministry, saying it cannot put ONGC-Mittal Energy Services Ltd on its mailing list for participation in its tenders for import of crude oil/LPG and export of petroleum products as the JV did not have the requisite 3-year experience, a government official said.
For becoming eligible for participation in public sector oil company tenders, a firm needs to have at least three years of international trading business experience and should have handled a thrusthold volume.
OMESL -- set up to provide trading, shipping and terminalling services -- had taken birth earlier this year.
"We cannot break norms for anybody," the official said.
A top IOC official said the company had some years ago turned away Reliance Industries Ltd for similar reasons.
Besides experience, the trading firm should also have parent company guarantees, which could be invoked in case of payment defaults. But in case of OMESL, the two promoters have agreed to provide only 'comfort letters', which has been rejected by IOC, the government official said.
Industry sources said Hinduja Group is also keen on re-entering the oil tranding business. Previously, Hindujas-promoted Gulf Oil had a subsidiary Gopoco for the same business but was barred by public sector firms around 1992.
The government official said Mittal had last month written to the petroleum ministry over delays in getting OMESL registered with refiners.
The ONGC board on September 6 decided to make application for registration of OMESL only with public sector refiners on the basis of a parent company 'comfort letter'.
In June, a government director on the board of Oil and Natural Gas Corporation had blocked the exploration firm's equity participation in OMESL as the ministry did not want the state-run firm to make huge financial outlays for non-core trading business.
Industry sources said frustrated at the delays, Mittal Steel has signed a preliminary pact with Total of France for cooperation in oil and gas business including trading.
When ONGC and Mittal Steel came together to form OMESL, the company was to initially quote only for naphtha/fuel oil export tenders of ONGC and crude import and petroleum product export tenders of Mangalore Refinery and Petrochemicals Ltd -- a subsidiary of ONGC.
Subsequently, it was to register with other refiners like IOC, Bharat Petroleum and Hindustan Petroleum.
OMESL was also to be used as vehicle for trading of oil and gas produced by ONGC Mittal Energy Ltd -- the other joint venture company between ONGC and Mittal Steel for buying oil and gas properties abroad.
Sources said OMESL proposes to build an export-oriented refinery in Nigeria for which the creation of a balance sheet had become important. It also required financial banking for filing for registration as a vendor with overseas exploration firms.
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