Mumbai: India’s largest state-run oil marketing company, Indian Oil Corp. Ltd (IOC), is earmarking $1 billion (Rs 4,570 crore) for overseas acquisitions in the exploration and production sector, which could include shale gas assets in the US.
“We can spend up to $1 billion to acquire a stake in assets abroad along with Oil and Natural Gas Corp. Ltd (ONGC) and Oil India Ltd (OIL). We are also looking at some opportunities in the US for shale gas assets,” B.M. Bansal, chairman of IOC, said in Mumbai after the company’s annual general meeting on Tuesday.
IOC already has a participating interest in nine overseas blocks in Libya, Iran, Yemen, Nigeria, Gabon and Timor-Leste, according to the company’s latest annual report.
Exploration activities are at different stages of progress, it added.
A consortium of IOC, OIL, ONGC Videsh Ltd, Repsol SA and Petronas had recently won a project in Venezuela for development, extraction, upgradation and marketing of heavy oil.
Though IOC is not setting aside this money at present, it will not be a problem raising the funds as and when it looks to acquire something abroad, said S.V. Narasimhan, director of finance at IOC.
IOC would soon be raising at least $2 billion through a follow-on public issue in which the government will sell 10% of its stake in the company, along with an offering of 10% fresh equity.
Narasimhan said the company had already managed to secure debt to the tune of Rs 14,900 crore.
In the next 15-20 days, IOC expects the government to clear subsidy dues to the tune of Rs 11,000 crore arising from under-recoveries faced by the company in selling petrol and diesel below cost price for the last two quarters, and the money to flow into the company later this fiscal after Parliament approves of the same, said Bansal.
Receipt of this money will strengthen the company’s cash flow.
Most of these funds would be utilized to fund a capital expenditure plan of Rs 30,000 crore that IOC has lined up for the current fiscal to expand refining capacity, enhance its pipeline network and fuel retailing outlets, and diversify into unconventional power.
Marking its entry into nuclear power, Bansal stated that IOC’s board of directors had cleared a proposal on Monday to invest Rs 961 crore to pick up a 26% stake in a 1,400MW power plant being built by Nuclear Power Corp. of India Ltd in Kota, Rajasthan.
The project, estimated to cost Rs 12,000 crore, will be funded through a mix of debt and equity, and IOC will have the option to raise its holding in the company to 49%.
Apart from nuclear power, IOC is also looking to build a liquefied natural gas terminal and a petrochemicals facility, boost its refining and pipeline capacity, and expand fuel retailing outlets.
IOC fell 0.79% to Rs 437.35 on the Bombay Stock Exchange on Tuesday, while the exchange’s benchmark Sensex index gained 0.48%.
“IOC’s diversification plans have been on the anvil for sometime now, including scaling up its overseas presence,” said Niraj Mansingka, oil and gas sector analyst at Edelweiss Securities Ltd.
“Expanding into other sectors could help offset the company’s dependence on government subsidies to meet under-recoveries, albeit not before the next five years,” he added.