The government is exploring the possibility of having only two major players in the oil sector by unifying the existing companies into two major entitites.

"We are looking at various options to strengthen the energy sector and merger is one of them. However, the proposal is still being considered and nothing has been finalised," Petroleum Minister Mani Shankar Aiyer, said on Wednesday.

Oil firms' merger = Rs 25,000 cr savings

Last week, the minister and the chief executives of the public sector oil companies discussed the issue of merging Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporationn Ltd with Oil and Natural Gas Corporation Ltd, and Oil India Ltd with Indian Oil Corporation.

The petroleum ministry sources had indicated that one of the proposals discussed, involved merging 11,000 petrol stations and 32 million tonnes of refining capacity of HPCL and BPCL with ONGC to create the world's largest oil firms.

On the other hand, oil producer OIL and ONGC's Assam and Gujarat oil fields could be given to IOC to provide India's largest retailing firm control of close to 12 million tonnes of crude oil.

The minister said that India needed to look at tapping non-conventional sources of energy to reduce the present strain on energy resources that have pushed up the oil prices.

He added that active participation of Panchayati Raj needed to be sought for the purpose.