Public sector oil and gas exploration company Oil India (OIL) will set up an overseas subsidiary by the end of 2013
to take over all its foreign businesses. The move is similar to ONGC?s creation of an overseas arm, ONGC Videsh (OVL), says a director in the company.
NK Bharali, director, business development, told FE: ?An overseas arm on the lines of OVL has been approved by the board. The company secretary is working towards finishing all the formalities for setting up the company. It should be set up in this calendar year.?
Not only will the company’s overseas businesses and assets be transferred to this new arm, but the employees working on these projects will also be shifted to the new venture. ?Some of us will become directors in the company as well,? he added.
Bharali said that, so far, having one entity for both domestic and overseas operations was good enough. But with the company now looking to focus more on overseas operations, it needed a dedicated team to acquire equity stakes in overseas projects and win blocks. ?At any point of time, we are looking at 5-6 overseas assets. Even if we have 10% success, it will be good because there are so many companies eyeing hydrocarbon assets,? he said.
Currently, most of the company’s overseas assets are at the exploration stage, making little contribution to the company’s overall oil and gas production and P&L.
Production from the Venezuelan Carabobo Project, where Oil India holds a 3.5% stake, commenced on 27 December 2012. The current production from the block is around 1,800 barrel per day (bpd). The consortium, which includes ONGC (11%) and IOC (3.5%), plans to achieve a production target of 90,000 bpd by 2015. In 2010, the Indian government approved investments of $2.18 billion for 2010-2015 by the three state-run oil companies.
OIL (20%) and IOC (10%) also jointly acquired a 30% stake in Houston-based Carrizo Oil & Gas’ shale assets in Colorado for $82.5 million. Production from these shale assets currently stands at over 400 barrels of oil equivalent per day (boepd).
The company has also made bids for blocks in neighbouring countries like Myanmar and Bangladesh. OIL, along with OVL, recently bagged two medium-
sized offshore blocks in Bangladesh with a total bid size of around $ 75 million.
OIL also jointly holds stake in a block in Iran along with OVL and IOC. The block is estimated to have reserves of up to 21.68 trillion cu ft (tcf), with recoverable reserves of around 12.8 tcf, but it has been in limbo owing to the sanctions against Iran. The company has also made investments in other trouble spots like Sudan, Yemen and Egypt.
Analysts say the company is increasing focus on overseas operations as its domestic production fields are ageing and it wants to diversify its resource base. Around 95% of the company’s reserves are in northeast India, a volatile region.
Strikes in Assam last year impacted the company?s oil and gas production ? oil production was down 5% to 3.7 mmt and gas production was flat at 2.6bcm.OIL’s replacement reserve ratio has also come down from a peak of 2.04 in FY08 to 1.23 in FY12.
OIL’s overseas arm will be based in the company’s current corporate office at Noida, Uttar Pradesh. Bharali added that though the company has not finalised a name for the overseas entity, a couple of them that have been proposed.
?We have about 2-3 names that have been proposed but we have not zeroed in on one particular name. It could be OIL Videsh or something like that, but it will reflect what we will be doing,? he said.