Mumbai: Bharat Petroleum Corp. Ltd (BPCL) plans to raise $200 million to fund the acquisition of a 3% share in the Lower Zakum Concession, Offshore Abu Dhabi, two people aware of the development said.

A consortium comprising state-owned Oil and Natural Gas Corp. Ltd (ONGC)’s overseas arm, ONGC Videsh Ltd (OVL), Indian Oil Corp. Ltd (IOCL) and Bharat Petroleum Corp. Ltd’s overseas arm Bharat PetroResources Ltd (BPRL) acquired a 10% stake in the ADNOC Group (Abu Dhabi National Oil Company) owned concession on 11 February. While OVL will hold a 4% stake, BPRL and IOCL will hold 3% each.

“BPCL is raising $200 million through a comfort letter from Standard Chartered Bank and DBS Bank to pay for its Lower Zakum Concession buy. A comfort letter is a kind of soft guarantee that the payment obligation would be met," a banker aware of the development said on condition of anonymity.

BPCL did not reply to an email sent on 14 February. While DBS Bank declined to comment, Standard Chartered Bank did not reply to an email sent on Wednesday till press time. 

“IOCL and OVL may meet their payment obligations through internal accruals," said the second person quoted above, also on condition of anonymity. 

This is the first time that Indian oil and gas companies have been given a stake in the development of Abu Dhabi’s hydrocarbon resources. The agreement has a term of 40 years, effective 9 March 2018. 

 “We are hopeful that this historic agreement will lead to further opportunities for Indian oil and gas companies to participate in the UAE’s energy sector," ONGC chairman Shashi Shanker had said on 11 February. 

The deal will give the Indian consortium access to about two million tonnes of annual share from the field which produces about 400,000 barrels of oil a day.

Supported by political and diplomatic efforts, Indian energy companies are forming consortiums to pursue acquisitions in international oil and gas fields. India imports nearly 80% of its crude oil. 

ONGC and Oil India Ltd account for 70% of the total oil produced in India, while the remaining 30% comes from private sector and joint venture companies.

 Abu Dhabi National Oil Company (ADNOC) will also fill up India’s 1.5 million tonne strategic petroleum reserve in Mangalore, beginning May.

India has built a strategic reserve capacity of 5.3 million tonnes at three locations—Vishakhapatnam (1.33 million tonne), Mangaluru (1.5 million tonne) and Padur (2.5 million tonne)—at a cost of Rs4,098 crore. The country plans to expand this capacity further.