Indian Oil Corp to Acquire Stake in Two Offshore Fields

Indian Oil Corporation, the country's largest refiner, will buy half of Hindustan Oil Exploration Co Ltd's stake in two oil and gas fields in offshore Tamil Nadu for $104.15 million.

"The IOC Board on Friday cleared plans to buy 50 per cent equity in development block PY-1 and 40 per cent in exploration block CY-OSN-97/1 from HOEC," sources said.

In line with its vision to become a vertically-integrated oil major, IOC will acquire stake in PY-1 at an investment of $104.15 million -- $12.54 million premium, $8.44 million past cost, $5million carry cost and $86.61 million development cost. With recoverable reserve of 166 billion cubic feet, the internal rate of return works out to be 17.8 per cent.

For CY-OSN-97/1, IOC will invest $7.81 million -- $0.40 million premium and $1.08 million carry cost. Since the block is in early stages of exploration, reserves and production profiles are yet to be established, sources said.

HOEC bought Mosbacher's equity of 53.85 per cent in PY-1 in 2003 to now hold 100 per cent. In CY-OSN-97/1, HOEC currently owns 80 per cent and Mosbacher the rest.

IOC, which made a foray into upstream business in 1996, has participated in the NELP bidding rounds in consortium with other state-run firms and was awarded two exploration blocks under NELP-1, eight under NELP-2 and one under NELP-3.