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Tata Sons may shut oil production arm Petrodyne in business revamp

LiveMint logoLiveMint 02-08-2017 Kalpana Pathak

Mumbai: Tata Sons Ltd may shut down Tata Petrodyne Ltd (TPL), its oil exploration and production arm, as new chairman N. Chandrasekaran weeds out businesses that are unprofitable or lack scale, according to two people aware of the development.

“Tata Petrodyne has not made much progress since inception. As part of the pruning exercise, Tata Sons has also slashed salaries of officials at Tata Petrodyne,” said one of the people on condition of anonymity as he is not allowed to talk to the media.

Registrar of Companies data shows Tata Petrodyne’s turnover at Rs66 crore for fiscal 2016-17. Filings confirm the firm has cut the salaries of its officials.

The company, which has a participating interest in four oil and gas blocks in India and one each in Indonesia and Tanzania, has a net worth of Rs385 crore—small in Chandrasekaran’s scheme of things.

On 22 July, the Tata Sons chairman told Fortune magazine that he was looking to prune the group’s portfolio and exit businesses that are not giving returns. “To get to the next level we need scale. We can’t do it with multiple small companies. We need top companies,” Chandrasekaran told Fortune. “We will exit if we aren’t getting returns today and we don’t think we’ll get them tomorrow.”

A Tata Sons spokesperson declined to comment.

“Tata Petrodyne has slashed investments in existing blocks and also did not participate in the latest bidding round of exploration and production blocks,”said an official from state-run Oil and Natural Gas Corp. Ltd (ONGC), which partners Tata Petrodyne in four blocks in the country.

Tata Petrodyne’s website, however, says that some of these blocks are in different stages of exploration and production. For instance, it says that it is trying to “revive” an offshore field asset in the Cauvery Basin while another block in the Palar Basin is in “the exploration phase and the drilling campaign has commenced in Feb 2017.”

In both these blocks, the firm holds a 21-30% stake with the rest owned by ONGC and other firms such as Hindustan Oil Exploration Co. Ltd and Cairn India Ltd.

Winding up isn’t an easy option either.

“If Tata Petrodyne decides to wrap up operations, it will have to sell its stake in the field to existing partners or find a new buyer. Given the present market, this may turn out to be a tough deal,” said an energy consultant on the condition of anonymity as his company does business with some of the firms mentioned earlier.

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