OIL plans to buy tech firm, run it as strategic business unit

OIL plans to buy tech firm, run it as strategic business unit

New Delhi: State-run Oil India Ltd (OIL), which is planning to acquire a technology firm in the hydrocarbon space, plans to run it as a strategic business unit on the lines of oilfield service firms such as Schlumberger Ltd and Halliburton Co.

The company is expected to have expertise in niche areas such as deep-sea well completion, well integrity, tight gas and well development of ageing and mature fields. OIL has set aside up to 4,500 crore for overseas acquisitions in the hydrocarbon sector.

“Providing technology services is a very lucrative business. This particular company that we plan to acquire has expertise in well planning and will help us in evaluating our fields for enhancement of production and reserves," said a senior OIL executive, who did not want to be named. “They are also experts in handling well development of ageing and mature fields."

“Going forward, it will serve as a strategic business unit with us, also providing services to other companies," he said, declining to comment further as the transaction is yet to be completed.

Some of the top technology service providers to the oil and natural gas industry, besides Schlumberger and Halliburton, are Fugro NV and Baker Hughes Inc. Soaring international oil prices are persuading oil firms to invest substantial amounts of money in prospecting for oil and a major part of expenditure is towards equipment and technology.

“Every company has certain in-house expertise...we can’t have world-class expertise in every field," said N.M. Borah, chairman and managing director of OIL. “This company may have technological expertise in some niche areas such as deep-sea well completion, well integrity and unconventional gas." He declined to comment further.

The development assumes significance given the number of companies engaged in the Indian hydrocarbon sector, apart from state-owned upstream explorers such as OIL and Oil and Natural Gas Corp. Ltd holding large acreages. Private sector companies have become interested in the sector after the new exploration licensing policy (Nelp) was launched in January 1999 to boost the search for hydrocarbons in the country.

Thus far, Nelp rounds have generated 87 oil and gas discoveries in 26 exploration blocks with hydrocarbon reserves of at least 642 million tonnes of crude oil equivalent. According to the BP Statistical Review of World Energy, India’s proven oil reserves rose 55.17% to nine billion barrels in 2010 from 5.8 billion barrels in 2009.

“It is a large and sophisticated play. With expanding acreages, more complex technology and a mix of commercial and unconventional sources, such expertise will be highly in demand," said Anish De, chief executive at Mercados EMI Asia, an energy consulting firm.

According to KPMG’s Oil and Gas Overview 2010, “With increased exploration activity in India post-Nelp, we are likely to witness increased demand for oil and gas allied services in India, particularly given the focus on deepwater blocks and frontier basins. Some of the local players might also offer their services to other E&P (exploration and production) firms across the world."

OIL’s net profit in fiscal 2011 increased 10.62% to 2,887.73 crore. Annual revenue from operations rose 5.03% to 8,303.38 crore.