Mr. RS Butola,
Chairman,
IndianOil
Public sector IndianOil (IOC) will take the Africa route to realise its ambition to become an ‘integrated global energy company’. The country’s largest company has lined up a massive investment plan for the second largest continent — encompassing not only refinery and marketing projects, activities the company is easily identified with, but large upstream ventures as well.
According to sources, IOC plans to set up businesses in more than 15 hydrocarbon-rich African nations. The plan includes taking stakes in various oil and gas blocks, buying equity in local energy companies, building refineries and city gas distribution networks and operating pipelines.
The overseas plan of IOC — the refiner that owns 10 out of India’s 20 refineries and having a third of its total refining capacity — also reflects its ambition to diversify into upstream oil and gas production, for which the African soil offers the perfect opportunity. IOC has identified countries like Algeria, Gabon, Cameroon, Egypt, Angola, Nigeria, Ghana, Libya and Kenya for investments mainly in acquiring development rights over blocks through participating in state auctions, taking equity in companies or through taking participating interest in blocks operated by others.
IOC’s overseas expansion in exploration is not affected by its cash flow problems in the domestic market due to price controls on diesel, LPG and kerosene, and the company is willing to spend up to $1 billion for very promising blocks.
“Our global projects in hydrocarbon exploration are on. If we make a discovery there, we will surely spend on developing and putting that field on production,” a company official recently told FE.
IOC is also ready for setting up refineries in countries such as Angola, Cameroon and Congo if they could allocate either producing or discovered oil and gas blocks. IOC is also open to making joint investments with African firms in other parts of the world.
Sources privy to the plans said that with the idea of enhancing the country’s energy security and the upward integration of its business, IOC has been in pursuit of exploration and production opportunities through a consortium approach. The company already has development rights on 13 blocks in India and on 10 blocks in countries like Iran, Yemen, Nigeria, Libya and Venezuela. It already has discoveries in three domestic blocks as well as in Iran, Nigeria and Venezuela. “Having built up a portfolio of blocks, both within and outside the country, IOC awaits a significant breakthrough,” said an IOC official. When asked about IOC’s investment plans, a petroleum ministry official, however, said that specific investment proposals would come to the government only at the time of project approval.
The company has steadily increased its refining capacity to 66 million metric tonne a year – at 5.3% growth a year – and has built a robust 10,899 km pipeline over the years, enhancing its reach to about half of the total petroleum products market in the country. It is also expanding its petrochemicals business to tap the Asian demand for polymers growing at about 10-12% a year.
IOC is also eying Africa, particularly, countries like Cameroon, Nigeria and Libya, as potential sources of liquefied natural gas (LNG) in the future. As India’s domestic natural gas output is declining, the energy hungry and fast developing Asian nation would be more dependent on imported LNG. IOC hopes to cash in on the opportunity in gas trading business.
