2005 - Oil India Limited

OIL beyond territorial barriers
Merger and Acquisition for Synergy in Petroleum Business
By J. M . BUJOR BARUAH
Shri J. M. B. Baruah, a Petroleum and Management
Consultant, was the Chairman and Managing Director of
Bongaigaon Refinery and Petrochemicals Ltd. He was also the
Director (Exploration and Development), Oil India Limited,
and former Managing Director of Prize Petroleum Co. Ltd.
BACK-GROUND
For about three decades, I was closely associated with Oil
India Limited as an employee in various capacities. I was
naturally delighted when I got an opportunity to share
some of my thoughts on certain aspects of future growth
potential of the company through the pages
of SYNERGY.
• Natural Gas Value Chain
• Chemicals Value Chain
The relationship amongst these value chains is explained
in figure 1 below :
As I have been, by and large, out of touch
with the thinking of the corporate level
management of the company for a fairly
long time; some of the views expressed here
may naturally be out of tune with the current
management thinking in the company. It is
needless to mention that the perspective
provided by my own work exposure outside
Oil India Limited during last decade has
largely influenced my thought process.
PETROLEUM VALUE CHAIN
We would now proceed to look at what merger and
acquisition could mean to a mid-sized financially sound
up-stream oil company like Oil India Limited. But before
doing so let us first look at what constitute the value chain
in the petroleum business.
The composite petroleum value chain has four individual
value chains as indicated below:
• Up-stream Value Chain
• Down-stream Value Chain
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Up-stream
Value Chain
Natural Gas
Value Chain
Down-stream
Value Chain
Chemicals
Value
Chain
Figure 1 : Segments of Petroleum Value Chain
Up-stream Value Chain
The segments of the up-stream value chain are
exploration, appraisal of a discovery, development of oil /
gas fields, production of oil and gas, storage and
transportation of crude oil and distribution of natural gas.
Down-stream Value Chain
The typical down-stream value chain comprises of
refining of crude oil, primary distribution of petroleum
products, storage in terminals, and marketing of
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