The move comes even as ONGC plans to go all out to intensify its E&P efforts. The teaming up with IOC will ensure that risks are shared and money could be sourced more comfortably. Sources say IOC would soon consider more joint ventures with ONGC for other blocks like the Cauvery and Kerala-Konkan basins though this could not be confirmed from company officials.

IOC has already indicated its interest in becoming an integrated oil company by entering into a strategic alliance with ONGC in areas like E&P, power, petrochemicals while imparting expertise to the latter in its key strengths of refining and marketing. The Fortune 500 company will look at regions overseas for upstream efforts and this includesAzerbaijan, Sudan, Russia etc. These ventures will be in tandem with ONGC Videsh, the overseas arm of ONGC.

IOC has also entered into a memorandum of understanding with Premier Oil of the UK for E&P activities in India's northeast region. The oil PSU had a similar understanding with Marathon but the MoU has not been renewed yet possibly because the US giant is more keen on getting a foothold in Essar Oil's middle-east operations. IOC had also planned to work on a producing field in Iran and plans to open talks with Elf Acquitaine Gaz of France on a possible alliance. Sources say that IOC would adopt a cautious approach to its upstream plans with ONGC as this still remains an "untested" area which calls for relatively high investments and slow/uncertain returns. That explains why the company has decided to begin with shallow waters before getting into the more capital-intensive deepwater exploration. There have also been unconfirmed reports that IOC could consider an alliance with ONGC for some of the blocksthrown open by the government under NELP.

What is of particular interest is that the two navratnas are now considering the option of forming an integrated oil company overseas (either Mauritius or Thailand) which would encompass all the vital functions of E&P, refining and marketing. The present thinking is for IOC and ONGC to have a stake of 40% each in the venture and offer the balance to a multinational oil company.