New Delhi: Oil India Ltd (OIL), the country’s No. 2 explorer, is racing to acquire producing properties overseas, shifting focus from new fields, to capitalise on cheaper assets during the downturn and limit investment risks, its chief said on Wednesday.
The company is in discussions to acquire stakes in producing fields in Africa and the Middle East or to buy companies with properties in those countries.
OIL, which is almost debt-free and aims to launch its initial public offering by September to fund its expansion plans, can invest $1.5 billion-$2.0 billion spread over a period to buy the assets abroad, NM Borah told the Reuters Energy Summit in New Delhi.
“Overseas, what we are primarily looking for is not to have any more exploration acreage per se, we are looking for producing property,” said Borah, who became chairman in December after serving OIL for more than 34 years.
The company aims to close its new overseas deals as quickly as possible to take advantage of the global economic slowdown and lower crude oil prices compared to last year’s peaks.
“We believe that the window of opportunity is not going to last forever, and we want to acquire new assets aggressively to avail the benefits of two things -- the general slowdown and comparatively low oil prices... oil assets can be acquired at a lesser price than it would have been a year ago,” he said.
OIL is competing for overseas producing assets with South Korean and Japanese firms, as well as state-owned firms such as CNPC, Sinopec, and CNOOC, which have spent years hunting for oil deals to fuel China’s economic boom. Other Indian companies such as top energy explorer Oil and Natural Gas Corp (ONGC) are also seeking such overseas properties.
OIL, whose assets in India’s northeast accounts for its entire crude oil production and the bulk of gas production, has hired US-based consultant PFC Energy to advise on its overseas acquisition strategy. The consultant is expected to submit its report in the next 15 days, Borah added.
“For Africa and the Gulf, we are in talks to acquire stakes in producing properties or acquiring companies having assets in these countries,” he said.
“If the property is good and matches our requirement we can invest $1.5-$2 billion spread over a period of time.”
Limit Exploration Risks
OIL now owns exploration assets in Gabon, Libya, Egypt, East Timor, Nigeria and Yemen, in which the company has so far invested up to Rs5.5 billion ($118 million), and which are not yet producing.
The company aims to begin exploratory drilling in its Libyan blocks in September-October this year.
“Today our strategy is to consolidate our work in all these acreages. Rather than having far too many acreages we would like to finish our work commitments as fast as possible so that at least in some parts we can make commercial discovery, that’s when revenue will start flowing,” he said.
“Otherwise we are putting money at risk everywhere.”
Borah said OIL would acquire exploration assets “only and only if it is very attractive, prospective and if possible bundle with a producing property”.
OIL was confined to northeastern India since its incorporation in 1959. It used the country’s 1999 exploration policy to spread its reach to 11 Indian states, after which the government allowed it to go global in December 2005. The company owns stake in about 12 blocks in seven countries.
In the last financial year the company’s crude production rose nearly 12% to 3.47 million tonnes. Its gas output was 2 billion cubic metres, mainly from ageing and declining fields.
“This year our target is to accelerate exploration in the northeast and raise the crude and gas production by 10 percent each,” Borah said.
To achieve the targets, OIL has implemented enhanced and improved oil-recovery techniques in many of its northeastern blocks.
The company currently earns revenue through local sale of oil and gas and from a local 1,157 kilometre pipeline running from the northeast to eastern Bihar state.
In the last fiscal year ending March, OIL’s profit rose nearly 21% to about Rs22 billion. The firm has cash reserves of about Rs62 billion.