Indian Oil Corp. to Spend $5B Over Next 5-7 Years to Expand E&P Business

Indian Oil Corp. to Spend $5B Over Next 5-7 Years to Expand E&P Business
Indian Oil Corp. plans to spend $5 billion over the next 5 to 7 years to expand its exploration and production business.

Indian Oil Corporation (IOC), the country's largest refiner and fuel retailer, allocated around $5 billion over the next five to seven years to grow its exploration and production business, as the firm hoped to capitalize on the decline in global oil prices to acquire upstream assets that have become more affordable, according to a report Monday by an Indian daily.

"Internationally, many assets are on sale. We will look at those ... We will participate in auctions overseas. We also intend to participate in the NELP [domestic auction of hydrocarbon blocks] when it happens," AK Sharma, director (Finance) at IOC said, as quoted in The Economic Times.

While several international and national oil and gas companies have responded to the 50 percent fall in oil prices by trimming their capital spending since the beginning of this year, petroleum firms in energy deficient India have been active in proceeding with upstream developments and acquisitions. Such an approach helps India to lower its fuel costs through the development of more domestic fields, while at the same time increasing ownership of overseas upstream assets in order to reduce fuel import cost.

Last month, ONGC Videsh Ltd. -- the overseas upstream arm of state-owned Oil and Natural Gas Corp. Ltd. (ONGC) -- acquired a 15 percent stake in the Vankor Field in Siberia, Russia from CSJC Vankorneft, a unit of Rosneft Oil Co.

According to The Economic Times, IOC -- whose operations focused mainly the downstream sector -- is in discussions with potential strategic partners internationally to purchase stakes in producing or near-producing assets.

Currently, IOC has small minority interests in 10 domestic and foreign upstream blocks, including three producing projects. The firm's largest foreign acquisition to date is its 10 percent stake in the Pacific Northwest LNG -- an integrated upstream and liquefied natural gas (LNG) project in Canada in which IOC is investing around $4 billion. The company has already pumped in $1.6 billion in the Canadian project, with the remaining $2.4 billion to be committed over the next two to three years, Sharma said.

The balance $2.6 billion or so of the development funds will be spent on acquiring new assets in India and overseas.

"This is not a big amount. And we will continue to invest mostly as part of consortium with other state firms," the IOC finance director said.

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