The Hindu Business Line : Overseas exploration projects

RIDING high after winning a block in Libya, the Oil India-Indian Oil Corporation combine has stepped up its demand for empowering the boards of the two companies with more financial powers for exploration abroad.

A senior IOC official said that empowering the boards would enable the oil entities to take quick decisions instead of waiting for the mandatory approvals.

Now, while the IOC board is empowered to clear investments up to Rs 1,000 crore, the OIL board's powers to clear projects is restricted to Rs 150 crore.

In case of investment proposals involving higher amounts, the two companies are required to first go to the Public Investment Board (PIB) and then to the Cabinet Committee on Economic Affairs (CCEA) for approval. This, according to the IOC official, could put the companies in a tricky situation as exploration and production opportunities abroad normally come with a limited time frame for submission of bids or making offers.

Working on a fast-track approval mechanism for the two entities to acquire overseas exploration and production (E&P) assets, the Petroleum Ministry had moved the Union Cabinet early this month.

However, no decision could be taken. According to Petroleum Ministry officials, the matter was deferred.

The Petroleum Ministry had proposed that the boards of OIL-IOC combine be given investment decision-making powers at par with those of ONGC Videsh Ltd (OVL) for foreign E&P ventures. The mechanism for OVL includes screening of proposals by an Empowered Committee of Secretaries (ECS).

If the Petroleum Ministry succeeds in getting the Cabinet nod, all overseas E&P proposals up to Rs 300 crore or $75 million to be undertaken jointly by OIL and IOC, would be cleared by the respective boards and proposals exceeding Rs 300 crore would be brought before the ECS, which would then give its recommendations to CCEA.

Meanwhile, the Finance Ministry had reportedly opposed the proposal to allow OIL-IOC to foray into oil and gas exploration abroad as this could create unnecessary competition for OVL. This is even as the Petroleum Ministry had inserted a clause to ensure that both would not bid for same projects.

The Finance Ministry was of the view that OIL-IOC should instead look to be strategic investors in OVL's overseas ventures.

It had asked the Petroleum Ministry to review its proposal as Navratanas had already been given greater autonomy in investments and joint ventures decisions.

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