The Hindu Business Line : IndianOil-OIL may set up SPV for acquiring assets overseas

INDIAN Oil Corporation (IndianOil)-Oil India Ltd may set up project-specific special purpose vehicles (SPVs) for acquiring overseas exploration and production (E&P) assets.

A proposal to this effect has been submitted to a Group of Ministers (GoM), which is looking at ways and means of providing more financial teeth to the two oil entities to acquire assets abroad, a senior official told Business Line.

The proposal for more financial powers to these two oil companies has been tossed around for some time now. It was referred to a GoM, as the Finance Ministry had sought certain clarifications.

The Finance Ministry was of the view that instead of OIL-IndianOil joining forces, something like an SPV- OIL Videsh Ltd - could be formed on the lines of ONGC Videsh.

It had also said that OIL should look to be the strategic investor in OVL's overseas ventures.

The Finance Ministry had pushed for setting up an SPV in order to save the parent company from exposure if any losses were suffered.

The Petroleum Ministry is also understood to have conveyed to the GoM that any large investment in overseas property was being done through this route.

For instance, when acquiring equity in the Greater Nile Oil Project in Sudan, ONGC Nile Ganga BV, a wholly-owned subsidiary of ONGC, was set up in the Netherlands to manage this property.

Exploration sector to be thrown open: The senior official indicated that though the initial proposal sent by the Ministry to the GoM was for giving more financial powers directly to IndianOil-OIL, it is now being contemplated that OIL or IndianOil should be allowed to tie up with other navratnas. Such a move would throw open the exploration sector for all oil public sector undertakings.

For instance, even GAIL (India) Ltd, Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) could now venture out with OIL for acquiring E&P assets.

It has been proposed that OIL would be allowed to form alliances with other companies such as GAIL, HPCL and BPCL and not restrict it to IndianOil alone.

This is in line with what OIL has been seeking from the Petroleum Ministry that it should be allowed to form strategic alliances with companies other than IndianOil to buy oil and gas assets abroad.

After the GoM nod, the matter would be referred to the Cabinet Committee of Economic Affairs for approval.

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