MUMBAI, Dec 20: Tariff commission chairman Vijay Kelkar on Saturday said that in the era of free market prices, stand-alone refineries or stand-alone exploration and production companies will be exposed to greater risks with excessive uncertainties regarding their profit margins.

Addressing the second Vasant J Sheth memorial lecture on transforming the country's oil industry- `an agenda beyond pricing reforms' at the YB Chavan auditorium in South Mumbai, Kelkar said that these uncertainties can be debilitating for small companies and may not not remain viable.

Hence, what is required is a reorganisation of all these different entities into fewer companies which are integrated but fiercely competitive in the market place. Such vertical integration can be done through equity swaps, acquisition or mergers.

Although the exact mode that will be chosen will vary from case to case, it would argue that such restructuring may have to precede any large scale disinvestment programme of major oil companies and this will then give them a better value. The most interesting possibility for equity swap would be between IOC and ONGC and thus create a vertically integrated oil company whose size and potential capacity is equal to some international majors, he said.

Kelkar further said that such organisation will be of crucial importance to our country's energy policies and energy securities. In this regard, the bureaucrat pointed out the example of petronet, which is an alliance of our oil companies to create a private sector company.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.