The Hindu Business Line : IOC-OIL acquisition vehicle to be in Mauritius

New Delhi, July 27 The special entity to be jointly floated by Indian Oil Corporation (IOC) and Oil India Ltd (OIL) for acquiring oil and gas assets overseas is to be set up in Mauritius. The two State-owned companies are expecting to register the special purpose vehicle in next three months.

While the board of OIL had already given its nod early this year, the IOC board’s go-ahead came last month. Speaking to Business Line, senior official of IOC said, “Our board in its last meeting (June) has given its nod to the proposal.”

The decision to set up the SPV in Mauritius was prompted by the tax benefits offered in that country. Besides, a stable Government in that country makes it easy to tap investment opportunities, sources added.

In the SPV, both IOC and OIL will have equal stake (50:50). The capital base in the SPV would be minimal in the beginning, which would subsequently be increased as per the requirements, sources added.

However, the SPV will not restrict the two entities from adopting a consortium approach whenever required. Both IOC and OIL prefer to adopt a two-model approach to acquire oil and gas assets.

Accordingly, they can either go through an OIL-IOC consortium or through a SPV bid for overseas assets. While the proposed SPV would look at producing and discovered assets, the consortium could pick up exploratory assets.

Besides, under the SPV route the burden would not be on the parent companies’ balance sheet. The advantage of consortium approach would be that the companies would enjoy tax benefits extended to exploration activities, industry experts said.

Apart from expediting the acquisition process, the SPV route would allow the companies to approach any prospective sellers as a single entity. The concept of SPV would not be new to both the entities, as currently the OIL-IOC consortium has to set up a project-specific SPV before acquiring an asset.

Under the current dispensation, the OIL-IOC combine as a consortium is allowed to invest up to Rs 300 crore after seeking approvals of the competent authorities — board approvals and Governmental nod — for acquiring assets. In keeping the consortium option open, OIL can also consider roping in other partners in those assets where IOC was not interested.

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