IOC keen to buy foreign oil firm

Indian Oil Corporation, the country's largest refiner, has put up a war chest of $2 billion for acquiring a medium-sized foreign oil firm to set up its own exploration and production division.

On IOC's radar are companies like Niko Resources of Canada, Cairn Energy Plc, Tullow Oil and Premier Oil, among others.

"A proposal for setting up an E&P subsidiary is listed for approval at the company's board meeting on April 28," sources said.

After the board approval, IOC, which commands 60 per cent of the petrol retail market in India and owns half of the 115 million tonnes refining capacity in the country, will go scouting for an E&P firm that will help it become a fully integrated company.

IOC aspires to acquire oil and gas fields through the subsidiary to cut dependence on imports to meet its crude oil requirement.

Sources said the move comes in the wake of government turning down the request for splitting the country's flagship overseas investment firm ONGC Videsh Ltd for accommodating IOC and GAIL India Ltd as partners.

"A subsidiary will not clash with government decision as OVL will continue to be the flagship acquisition vehicle in government-to-government deals while IOC's E&P division will venture into taking over private firm stakes," they said.

IOC is looking for a medium-sized foreign firm with expertise in oil and gas exploration and production. "The company wants the best of professionals to stand tall against OVL, the subsidiary of Oil and Natural Gas Corporation," sources said.

The government had, last fiscal, also ruled out creating another OVL type firm with GAIL, IOC, Bharat Petroleum Corp Ltd and Oil India Ltd as promoters saying it didn't want two Indian companies to compete with each other for the same property.

It had asked IOC, GAIL and OIL to go with OVL as partners in future acquisitions of oil and gas fields abroad. While OVL was to have 40 per cent of equity oil abroad, GAIL and IOC were designated to take 25 per cent apiece and OIL the remaining 10 per cent.

IOC and GAIL had sought either sharing in the equity and participation in the OVL board or being allowed to set up their own overseas subsidiaries to fulfill their ambition of owning fields in oil-rich nations.

With domestic crude oil production of 33 million tonnes meeting only 30 per cent of the requirement, India is acquiring oil and gas fields abroad to attain energy security.