IndianOil looks to sovereign fund for aggressive foreign forays
New Delhi   01-Apr-2010

IndianOil, the country’s largest oil marketing company, is diversifying into new businesses in the upstream sector. At the same time, IOC is facing tremendous liquidity pressure due to rising under-recoveries and lack of clarity in getting compensation from the government. Mr. Brij Mohan Bansal, Chairman, IndianOil, spoke to Siddhartha P. Saikia at the twelfth International Energy Forum in Cancun, Mexico, about the navratna company’s roadmap to emerge as an integrated energy company. <font color=#65000><b>Excerpts from the Interview:</b></font> IndianOil is getting active in upstream sector overseas. How do you plan to compete with Chinese and other leading global oil firms in the international market? Global majors are integrated energy giants. In order to bag good assets, a company must be extremely cash-rich, which we are not. We are following a normal procedure and leveraging out best capabilities. Though, the gestation period is long, projects overseas give good results. If our financial health improves, we will move forward more aggressively to acquire oil and gas assets globally. <b>On one side IndianOil is facing the pressure of rising under-recoveries. On the other hand, you are investing in upstream projects. How do you maintain equilibrium between the two?</b> IndianOil as a company cannot do much in terms of getting compensated against under-recoveries. At the same time, government has also some limitations. We will have to work under these conditions, try to grab the best possible opportunities wherever available. <b>India is planning a sovereign fund that will help public enterprises in foreign acquisitions. How will IndianOil benefit from such a scheme?</b> A sovereign pool of fund is very important for oil companies to be successful in the global arena. Energy deals are always big-ticket transactions. If we get access to funding immediately, it will speed up projects and also help the company seal new deals. What is your agenda at this conclave of energy ministers and companies from 60 nations? We are always on the look out for acquisitions. Due diligence is an ongoing process. But we are concentrating on two to three projects. IEF is a good platform where we can discuss options that will be profitable in the long run if not in the immediate future. <b>How do you see crude prices moving in the new financial year?</b> No one can predict in which direction crude prices will move. Crude prices have been range-bound between $60 and 80 per barrel for some time now. But, I feel it will move forward and touch $90 per barrel. It should be in the range of $80-$90 per barrel. <b>What is your estimate for under-recoveries in the new financial year?</b> Under recoveries in 2010-11 will be very high. At present, the average crude price is around $70 per barrel. It may be close to $80 in the new year. The Indian government must do something: either increase the price of subsidised fuel or compensate oil-marketing companies in full.