LN Mittal teams up with ONGC

By agencies   |   Friday, 22 July 2005, 07:00 Hrs
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NEW DELHI: LN Mittal is joining hands with petro behemoth ONGC to float an energy consortium for overseas acquisitions. The final agreement on the consortium is expected to be signed shortly.

While this signals the beginning of India’s highest profit-making company, the $14 billion ONGC group, moving into the big league, for the world’s largest steelmaker — the $22 billion LNM group — it’s a move from steel to a whole new world of oil and gas. The joint consortium will seek to acquire overseas equity in oil and energy-related businesses like energy trading and shipping.

Mittal Steel, the flagship company of the LNM group, has steel-making facilities in 14 countries and sales and marketing offices in 11 more. Mittal Steel has operations in Kazakhstan, South Africa and Algeria, apart from the US and Europe. It has also agreed to acquire a 37 percent holding in Hunan Valin Steel Tube and Wire Co in China.

For instance, the presence of the LNM group in oil and gas-rich countries like Kazakhstan could help ONGC to expand its oil and gas interests in central Asia.

According to sources, “The idea is to build on each other’s strengths. The LNM group is a dominant player in many markets where ONGC is seeking to acquire equity in oil. Partnering an established company like Mittal Steel in these markets could give ONGC the added advantage.”

Most analysts believe that the spike in oil prices in recent times only reinforces the trend of high crude prices in the coming years.

Most oil-producing companies worldwide have raked in whopping profits, thanks to the sustained rise in crude oil prices. Back home, ONGC recorded its highest profit in 2004-05, crossing the $ 2.7 billion mark.

The new consortium will need necessary clearances from various government departments before it can become fully operational, sources said.

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