25th March, 2021 was a historic day for the stakeholders of NRL and OIL, and the employees and their families of these two great Organizations. On this day, Share Purchase Agreement (SPA) was signed between BPCL and consortium of OIL & EIL for sale of 43.05 crore shares in NRL to the consortium at a consideration of Rs.9,375.96 crore. EIL paid Rs.700 crore for 3.21 crore shares while OIL bought 39.84 crore shares for Rs. 8,675.96 crore. The remaining 2.29 crore equity shares held by BPCL have been purchased by Government of Assam for Rs. 500.00 crore. With these transactions, BPCL has transferred its entire 61.65% holding in NRL to the Consortium and Govt. of Assam.
For OIL, acquisition of majority shares of NRL is not only a strategic business decision but one of the defining moments of OIL’s corporate journey as an E&P Company looking for vertical integration in the oil & gas value chain. The acquisition is likely to partially mitigate the effect of volatility of crude price cycle due to diversification of cash flows, reduce earnings volatility and enhance shareholder value. At the same time, NRL also now has become part of an integrated energy company and together OIL-NRL can create a tremendous synergy that will help both the entities to consolidate their business plans and achieve sustainable growth and success in all their endeavors.
The following are some of the major highlights of the acquisition of NRL by OIL post divestment by BPCL:
- New Share holding pattern of NRL
Oil India Limited : 80.16%
Govt. of Assam : 15.47%
Engineers India Limited : 4.37%
- OIL has become the promotor and the holding company of NRL with majority shareholding.
- As majority shareholder and holding company, OIL CMD has now become the Chairman of NRL’s Board.
- Shares were sold by BPCL at a price of Rs.217.75 per share which was offered by OIL & EIL. At this price, NRL is valued at INR 16,018 crore.
- Government of Assam intends to increase its shareholding in NRL to 26%. To achieve this, GoA is likely to purchase remaining shares from OIL in due course of time at the same valuation at which OIL has purchased shares from BPCL.
The OIL-NRL Synergy
- OIL is the primary source of crude oil for NRL. Annually, OIL supplies around 2,000 TMT of crude oil to Numaligarh Refinery, which is 67% of NRL’s requirement. Further, the amount of crude oil supplied by OIL is around 60% of indigenous crude produced by the Company in North East. Both the companies can benefit from optimisation/ further improvement of feedstock supply and crude processing at the refinery.
- OIL produces around 7-8 MMSCMD of NG in North East, out of which around 1 MMSCMD is supplied to NRL.
- OIL is currently operating the Naharkatiya-Barauni crude pipeline as well as Numaligarh-Siliguri Product Pipeline.
- NRL is executing a cross-country crude pipeline of 1630 KM in length which will traverse through 5 states (Odisha, West Bengal, Jharkhand, Bihar and Assam). OIL’s expertise in execution and operation of pipelines can be shared in development of the same.
- NRL has already ventured into upstream oil exploration partnering with OIL as operator in two oil blocks (Namrup and West Mechaki). NRL has earmarked investment of around Rs.90 crore in these two blocks.
- NRL has ventured into production of value-added food grade wax, food grade hexane and exploring possibilities for developing other niche chemicals like furfural alcohol, biodegradable plastics etc. NRL can leverage OIL’s international presence and explore export markets for such products.
- OIL and NRL are partners in several other joint ventures in related businesses. The synergy will enable further consolidation of OIL-NRL group in such JVs.
- OIL and NRL are also the promoters, 20% shareholding each in Indradhanush Gas Grid Limited (IGGL) where we will be setting cross-country NG Pipeline connecting all the state capitals of North East.
OIL and NRL have a very special place in the hearts of the people of Assam, where both the Companies have grown. The Central Government as well as the State Government have laid huge emphasis on Act East Policy with focus on creating long lasting business relations with the neighbouring countries on the North Eastern frontiers of our country. Together, OIL and NRL will be able to play a pivotal role in contributing towards fulfilling this vision. With the massive refining capacity enhancement project of NRL and aggressive exploration plans of OIL in existing and new hydrocarbon blocks in North East, OIL-NRL will be able to contribute immensely in ensuring energy security of the nation and achieve the targets set by the Ministry of Petroleum and Natural Gas under North East Hydrocarbon Vision 2030. Presence of EIL in the consortium will further boost the technical expertise, which will become more relevant considering the expansion plan of NRL.