Premier was to have offered IOC a 30 per cent stake in the Balal field but has now sold its entire holding of around 80 per cent to Elf Acquitaine Gaz of France. "IOC will now have to begin talks with Elf to buy out a portion of its holding," sources said. A further delay could occur as the finance ministry has still not cleared the earlier proposal of IOC teaming up with Premier Oil.

No reasons have been offered for the belated decision but the fact remains that this has only led to huge uncertainty on IOC's participation in the project. A timely decision would help as the Fortune 500 company will, in any case, have to start work all over again after Premier's withdrawal from the project. More importantly, it remains to be seen if Elf would be ready to part with a portion of its stake.

IOC has made it clear that itis keen on getting into upstream activities both here and abroad. It has recently entered into a strategic alliance with the Oil and Natural Gas Corporation to work jointly in exploration and production, refining and marketing, power and petrochemicals.

The regions that have been identified for exploration work include Azerbaijan and Kazakhstan, Russia, Algeria, Sudan. IOC is also in the race with the Gas Authority of India to partner ONGC Videsh to work on the Abhokima exploration block in Iraq. As per the agreement between the two navratnas, IOC will be given the first right of refusal for any ONGC contract and the converse will apply to any refining project promoted by IOC.

The R-group report on restructuring the oil sector was of the view that efforts should be made to acquire acreage abroad and add to the country's equity in international reserves. "India possesses the competence, manpower and service industry to explore, develop and access the reserves of oil and gas in international basins.National oil companies (NOCs) and Indian private companies must organise themselves to take advantage of India's strengths and acquire equity in international oilfields," the group stated in its report.

The committee acknowleged that both NOCs and the private sector would need substantial support from the Government in terms of policy initiatives for exports. While opening Indian markets to the world, it may be necessary to link the same with exploration efforts in Iraq and the countries of the former Soviet Union. The R-group was of the view that the Central Asian countries, believed to contain about a fifth of the world's reserves, are potential areas.

To facilitate the process of working overseas on exploration efforts, the group recommended incentives in the form of tax reliefs/exemptions. Domestic exploration companies may also be allowed to invest abroad as an offset to the taxable income. The committee said that to enable local companies raise the capital required in foreign currency, domestic oiland gas production should be treated as deemed exports so that a part of the revenue can be considered to have been earned in foreign exchange. The forex so earned should be allowed to be retained by the Indian companies as a revolving fund for overseas ventures.