New Delhi, April 4: Indian Oil Corporation (IOC) is ready to pick up a 25 per cent stake in all overseas projects that ONGC Videsh (OVL) takes up in future to enable it to get into the upstream oil exploration and production business.

Sources say the IOC proposal was placed before the ministry of petroleum and natural gas earlier this week. As part of the company’s corporate vision to emerge as a global integrated energy major, IOC is prepared to invest as much as 30 to 40 per cent in all domestic oil exploration and coal-bed-methane blocks that Oil and Natural Gas Corporation (ONGC) takes up within the country.

The success of OVL’s overseas acquisitions in Russia, Sudan, Vietnam and Myanmar have prompted IOC to look outwards and work out a business model that involves closer co-operation between the country’s two oil giants. While IOC recognises the core competence of ONGC and OVL in the upstream sector, there is scope to go in for better acquisitions by pooling the resources of the two firms.

The downstream national oil companies — IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) — have already bid for some domestic blocks in partnership with ONGC under the latest new exploration licensing policy round. The IOC proposal aims to take this co-operation further.

IOC appears to have adopted a more pragmatic approach for its upstream plans compared with its earlier approach of wanting to strike out on its own.

The danger of more than one Indian company scouting for oil assets abroad is that they would end up competing with each other and driving up the prices of these assets. From the national standpoint, this joint venture approach between IOC and OVL makes more economic sense.

In fact, OVL has complained in the past about the ‘adventurism’ of Gail (India) Ltd which had wrecked some good deals that OVL had lined up. The ministry had to ask other public sector companies from needlessly coming in OVL’s way.

OVL is in advanced stages of negotiating a deal for a 50 per cent stake in a producing field in Angola. IOC could well end up with a stake in this pie if the government clears the proposal.

At present, OVL faces stiff competition from the Chinese national oil company and Malaysia’s Petronas in its overseas acquisitions. With IOC ready to enter into a joint venture, OVL would acquire more financial muscle to take on rivals.

ONGC has in the past been reluctant to involve other Indian firms in its successful ventures. Officials feel that since IOC’s proposal relates only to future acquisitions, ONGC should not have any major objections.