New Delhi: The country’s biggest refiner, Indian Oil Corp. Ltd (IOC), may spend as much as $3 billion (Rs11,880 crore) to buy an overseas oil producer to meet rising demand in the world’s second fastest growing major economy.

Growth graph: A worker in front of IOC’s storage tanks in Mumbai.

The target will be a company that owns fields in Africa or countries that were part of the former Soviet Union, B.M. Bansal, director (business development), said. The acquisition will be made jointly with Oil India Ltd, a state-run explorer, he said.

IOC and Oil and Natural Gas Corp. Ltd, the nation’s biggest explorer, are scouting for projects in Russia, Kazakhstan, Iran and Africa to meet fuel demand in a race with China, which is securing energy supplies to feed the world’s fastest growing economy. India imports three-fourths of its oil as production from ageing domestic fields is slumping.

“We would like to tap some new areas that are coming up in the world oil map rather than trying to get into already established markets," Bansal said. “We are working both at our level and at a government-to-government level."

The refiner is seeking new oil producing areas and has sought government help in its hunt for crude producers.

India, beaten by China to more than $10 billion of overseas energy assets in the last two years, plans to emulate its rival by building ports and railways in Africa to secure oil and gas fields. Indian companies will seek to build refineries and pipelines in Africa’s oil-producing nations, oil minister Murli Deora had said at an India-Africa conference to discuss oil cooperation in November. India needs to find new sources of fuel as the government wants to bump up growth to 10% from about 9% expected this year to increase jobs and eradicate poverty.

IOC wants to get about 2 million tonnes (mt) of crude oil a year from overseas fields it will hold by 2012. It wants to own exploration areas overseas, fields that have been discovered and need to be developed for production and producing areas, Bansal said.

The company owns blocks in countries such as Libya, Nigeria and Yemen where finds have yet to be made, he said. “The idea is to have a diversified portfolio," he added. To secure fields, the company will offer to build refineries and pipelines in return. IOC has already made such offers to Nigeria, Libya and Turkey, he said.

“Acquiring a company will add value to Indian Oil," said Rohit Ahuja, analyst at Mumbai-based JM Financial ASK Securities Ltd. “They are in need of oil and getting it from their own source will mean getting it cheaper. That will help in improving their refining margins."

Earlier this month, India made its entry into Turkey. The country’s energy markets regulator on 7 December approved a planning application by IOC and Turkish builder Calik Holding for a refinery, for which a feasibility study is being conducted.

A decision on the investment will be taken once the study is complete, Bansal said.

India’s biggest refiner may import as much as 45mt of crude, or 900,000 barrels a day, in the year that began 1 April, S. Narasimhan, IOC’s finance director, had said on 12 October. The imports will be 7% more than an estimate of 42mt in January.

IOC plans to spend Rs30,000 crore in the next five years to build plants to make chemicals for making plastics and textiles, Bansal said. One plant is being built adjacent to its refinery at Panipat in Haryana and another at its planned refinery in Paradip, Orissa.

The refiner is building chemical plants to cut losses as the government caps selling price of petrol, diesel and cooking fuels to control inflation. The Union government has not allowed an increase in retail prices this year even as crude oil costs have surged to a record.