The Hindu Business Line : IOC, Oil India acquire stake in Reliance’s East Timor block

New Delhi, June 7 Indian Oil Corporation Ltd (IOC), along with Oil India Ltd (OIL), has reached an understanding with Reliance Industries Ltd (RIL) to acquire stake in the latter’s offshore oil block in East Timor. Sources told Business Line that an agreement was inked between the State-owned companies and RIL this week.

Both IOC and OIL will acquire an equity stake of 12.5 per cent each in the project. RIL will hold a majority stake in the block and will be the operator of the area spread over 2,384 sq km. Sources said that IOC and OIL have made a financial commitment of $27 million. The entities are now going to approach the East Timor Government for approval.

Though the consortium of IOC and OIL has been working together in acquiring hydrocarbon assets abroad, this is the first time that the two have joined hands with RIL. Under phase-I, in three years of the exploration activity the companies are going to undertake three-dimensional seismic surveys and drill one exploratory well.

Both IOC and OIL had taken their respective Boards’ approval to acquire equity in RIL’s asset as farm-in partners in 2007-08 fiscal. The approval of the respective Boards was taken after the technical teams of IOC and OIL expressed satisfaction on the data made available by RIL.

In May 2006, RIL had won a block in East Timor — area ‘K’ — after bidding for two of the 11 offshore blocks tendered. RIL has now signed an agreement to explore for oil and gas in East Timor and will explore the offshore area in contract area ‘K’ that has proven reserves in the Australian North West Shelf and is adjacent to the Timor sea.

A common feature among the global oil and gas exploration companies is a farm-in activity, which allows an entity to come in as a partner. As a farm-in partner, a company is not required to acquire the asset directly, but develop the property by taking participating interest in the block. The company also shares the risk involved in the exploration activity with the operator.

As to how the entities are going to benefit from it, sources said, it is a combined effort, and each will bring to the table its expertise.

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