Crude Reality: Indianoil Plans to Build Strong Upstream Portfolio
Indian Oil Corporation (IOC) is hoping to build a strong upstream portfolio as the oil rout turns assets cheaper while leaving traditional upstream companies such as Oil and Natural Gas Corporation with depleting cash reserves.
The company is evaluating 10-12 acquisition opportunities every month and has entered into confidentiality agreements on 4-5 probable deals said a senior company executive, requesting anonymity, in a growing sign of the seriousness with which IOC is pursuing its upstream ambition.
IOC and Oil India have signed a non-binding agreement with Russian oil firm Rosneft for taking 10% stake each in the TaasYuryakh field in east Siberia, the executive said. IOC is also seeking a stake in the Vankor field in Russia, where ONGC purchased a 15% stake last year. “This is the time when we must build assets,“said the executive. The company plans to raise its annual output to 6 million metric tonne (MMT) in five years from 0.5 MMT now, he said. The target s equal to a third of the current annual domestic output of ONGC, the nation's largest oil producer.
IOC is a peripheral player in the exploration and production (E&P) business with mostly lower minority stakes in 10 blocks at home and seven overseas. Only three of its projects produce today. The company is targeting to own minority stakes in producing or discovered fields in geopolitically safe regions, the executive said. “It's a trade-off. Producing fields in safe areas will not come cheap,“he said.