Iran threatens legal action over IOCآ’s Chennai move

Vol 6, PW 12 (14 Aug 02) Midstream & Downstream
     

THREATS OF LEGAL action could force Indian Oil to reverse its decision to stop paying marketing margins.

It's not widely known that the National Iranian Oil Company has a 15.38% stake in Chennai Petroleum and is the company's largest minority shareholder. Now we hear NIOC is threatening Indian Oil with legal action unless it reverses its decision.

It seems NIOConly agreed to transfer its shares to Indian Oil on the following strict conditions: CPCL's commercial interests should be fully protected; IOC should protect CPCL's agreement with BPCL for sharing of marketing margins; CPCL should continue to be allowed to directly market its products. NIOC reminds IOC that its MoU with CPCL confirms these conditions and that the MoU states that only the pricing formula - not marketing margins - will be revised from 1st April 2003.

"These are two different issues and should not be confused." If IOC persists, "minority shareholders may initiate legal process for an appropriate remedy." NIOC also points out that the loss of marketing margins will slash Chennai Petroleum's profits by up to 60%. "This will have a cascading effect.

CPCL's share prices will be hit, as will be its credit rating and ability to finance new projects." Separately, Chennai Petroleum tells Indian Oil it deserves to be treated differently than IOC's other refineries. "The losses and profits of IOC's individual refineries are not public knowledge," claims Chennai Petroleum.

"Our financial figures are publicly reported. IOC funds its refineries internally but wehave to fend for ourselves."