Richa Mishra

New Delhi, Nov. 13

OIL India Ltd (OIL) and Indian Oil Corporation (IOC) may have to wait longer before they get more financial teeth to acquire overseas exploration and production (E&P) assets.

According to a Petroleum Ministry official, the Finance Ministry has sought some clarifications on the proposal.

The issue has since been referred to a Group of Ministers comprising the Finance Minister, Mr P. Chidambaram; the Heavy Industries Minister, Mr Santosh Mohan Dev; and the Petroleum Minister, Mr Mani Shankar Aiyar.

The Finance Ministry, according to sources, had opposed the move stating that this would create unnecessary competition for ONGC Videsh Ltd (OVL). This was despite the Petroleum Ministry inserting a clause in the proposal that would ensure that both OIL-IOC and OVL would not bid for the same blocks.

SPV: The Finance Ministry is understood to be of the view that, instead of OIL-IOC joining forces, a special purpose vehicle (SPV) like OIL Videsh Ltd could be formed on the lines of ONGC Videsh. It has also said that OIL should look to be the strategic investor in OVL's overseas ventures.

A senior official told Business Line that the Petroleum Ministry has suggested certain changes in its proposal, which will throw open the exploration sector for all oil public sector undertakings. The Ministry will propose that along with IOC, other downstream companies should also be allowed to partner with either OIL or IOC for such assets.

OIL wants tie-ups: Meanwhile, OIL is also understood to have asked the Petroleum Ministry that it be allowed to form strategic alliances with companies other than IOC to buy oil and gas assets abroad. It has said that the Government could consider allowing it to go alone for a techno-economically feasible opportunity in case IOC or any other national downstream company is keen to take part in that opportunity.

The Petroleum Ministry had approached the Cabinet Committee on Economic Affairs (CCEA) in October for a fast-track approval mechanism for OIL-IOC to acquire overseas E&P assets. The Ministry recommended that the OIL-IOC combine be given investment decision-making powers on par with those of OVL for E&P ventures abroad.

(This article was published in the Business Line print edition dated November 14, 2005)
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