In a noteworthy development, the state-owned Indian Oil Corporation (IOC) has successfully acquired Mercator Petroleum for approximately Rs 148 crore through an insolvency proceeding, as confirmed by the company’s regulatory filings.
The acquisition marks a significant step for IOC, with its resolution plan gaining the approval of the National Company Law Tribunal, Mumbai Bench, on November 2, 2023, under the pertinent provisions of the Insolvency and Bankruptcy Code, 2016.
Mercator Petroleum Limited (MPL) holds an onland oil and gas exploration block strategically located in the Cambay Basin, Gujarat. This block, known as CB-ONN-2005/9, was secured by Mercator in the 7th New Exploration Licensing Policy (NELP) bid round in 2008. Notably, it possesses the potential for an oil discovery of a substantial 45.5 million barrels of in-place reserves. IOC’s Koyali refinery, positioned just 60 kilometers from the block, already had a contractual agreement in November 2019 to purchase oil produced from this region.
The resolution plan put forth by IOC outlines its commitment to pay Rs 135 crore to secured financial creditors who had recognized claims amounting to Rs 291 crore. However, no provisions have been made for unsecured financial creditors, who acknowledged claims of Rs 118 crore. Furthermore, the resolution plan allocates Rs 5.40 crore to operational creditors, covering vendors, workmen, employees, and statutory dues, against their combined admitted claims of Rs 73 crore.
In addition to these considerations, IOC will bear the insolvency proceeding costs, totaling Rs 8.7 crore. Notably, the insolvency proceedings were initiated by the Cayman Island-based oil services firm, Halliburton Offshore Services Inc., in August 2021, due to Mercator’s default on a payment of Rs 2.87 crore.
IOC’s resolution plan for Mercator Petroleum received unanimous approval from the committee of creditors through a resounding 100% vote. The plan subsequently made its way to the National Company Law Tribunal (NCLT), where it was granted the official seal of approval.
This acquisition sets a significant precedent, with IOC becoming the second public sector undertaking (PSU) to secure a company via an insolvency proceeding. Earlier this year, GAIL, India’s largest gas company, achieved a remarkable feat by acquiring the insolvent private-sector chemical company, JBF Petrochemicals, for Rs 2,079 crore. This strategic move expanded GAIL’s presence in the petrochemical industry. Notably, GAIL outbid a consortium comprising IOC and Oil and Natural Gas Corporation (ONGC) during the insolvency process, led by IDBI Bank, to recover dues amounting to Rs 5,628 crore owed to financial and operational creditors.
JBF Petrochemicals was established in 2008, with the aim of establishing a 1.25 million tonnes per year capacity purified terephthalic acid plant at the Mangalore Special Economic Zone. Although the plant commenced operations in 2017, it ceased production after the company’s loan defaults in the same year. Mercator Petroleum Ltd. (MPL), as a wholly-owned subsidiary of Mercator Ltd., is actively engaged in the petroleum exploration, development, and production sector, both within India and overseas.
This strategic acquisition by IOC underscores the corporation’s commitment to bolstering its presence in the vital oil and gas sector, securing a valuable asset in its quest for energy self-sufficiency.