| Gold rush
Calcutta, July 21: Indian Oil Corporation (IOC) will embark on an overseas oil-hunt with ONGC Videsh (OVL), Oil and Natural Gas Corporation’s wholly-owned arm in an upstream gamble for the Fortune 500 refiner.
Having already sealed two deals, one in Iran and the other in Sudan, Indian Oil is closing in on Ghawar gas field, one of the largest on-shore fields in Saudi Arabia. The total cost of the project — two petrochemicals, two power plants and pipelines — is estimated at $ 20 billion. The IOC-OVL consortium was invited to join road-shows that began in London on Monday.
A senior Indian Oil executive said the company is keen on bidding for a stake in south Ghawar, which went on the block after Saudi Arabia ended ExxonMobile-led consortium’s contract for the gas field.
The consortium, which also included Shell, BP and ConocoPhilips, was to invest $ 15 billion in the project. However, the deal unravelled when the companies wanted greater share of production than the Saudi Arabia was ready to offer. There was also a disagreement on the rate of return on investments made in the petrochemical, power and desalination plants.
The IOC-OVL combine has already held a round of discussion in June with Saudi Aramco chief executive officer Abdullah S. Jumah on clinching a stake in the field. Sources said the meeting took place while IOC chairman S. Ramachandran was on a contract-signing tour to Riyadh.
ONGC Videsh will hold a majority stake in the consortium that will bid for south Ghawar, estimated to contain 35 trillion cubic feet of gas reserves, sources said. “ IOC has already indicated to Saudi Aramco that it is interested in the project, along with the associated petrochemicals and power projects,” the sources added.
Ramachandran and OVL managing director Atul Chandra will hold talks with Saudi Arabian oil major in London.
Apart from Saudi Arabia, Indian Oil is looking at exploration projects in other parts of West Asia and Africa to expand its oil and gas assets. The IOC executive said similar ventures in Kuwait, Bangladesh, Qatar, New Guinea and Indonesia are possible.
While ONGC Videsh would be its main partner in oil-hunts abroad, IOC is also looking at alliances with Malaysian giant Petronas and Premier Oil of the UK. “We have an expertise in refining and marketing, but we need a partner in exploration and production,” he said.