Oil PSUs merger: New entity would face significant challenges, says Fitch

Oil PSUs merger: New entity would face significant challenges, says Fitch

The proposed merger of India’s state-owned oil companies would face significant execution challenges related to managing integration of employees, addressing overcapacity in the merged entity and winning the backing for the merger from private shareholders, according to Fitch Ratings.

The US-based credit rating agency, however, said the merger could reduce inefficiencies across the sector. “It would also create an entity that is better placed to compete globally for resources, and less vulnerable to shifts in oil prices,” the firm said in a statement.

The merger is likely to give the new entity much stronger bargaining power with suppliers, and greater financial clout to secure oil resources. Most Asian countries have only one national oil company integrated across the value chain. In contrast, there are 18 state-controlled oil companies in India, with at least six that can be considered key players – Oil India, Indian Oil, Bharat Petroleum, Hindustan Petroleum, GAIL (India) and ONGC. Read More…

Credit By : Energy Economics Times

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