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Indian Interest in Oil Flows in Both Directions State-Owned Giant Eyes Up North Sea Assets, While Regulator Encourages Scottish Exploration, Hears Mark Williamson

Posted on: Friday, 18 November 2005, 12:00 CST

By Mark Williamson

THE head of India's biggest company said he was keen to buy North Sea oil and gas fields as regulators drew up plans to get more Scottish firms to invest in the country. Subir Raha, chairman of ONGC, said the state-owned oil and gas giant was finalising plans for a dollars-25bn (GBP14.5bn) expansion of its overseas empire and had already started fishing for deals in the deep waters off Scotland.

In a sign that ONGC was ready to invest heavily in the area, Raha said it had recently "bid very hard" in an unsuccessful attempt to buy the Buzzard oil field. Discovered in 2001, this was the biggest find in the North Sea for more than a decade. It is expected to yield more than 500 million barrels of oil, and Dutch energy investors recently paid GBP133m for Edinburgh Oil and Gas just to acquire that firm's 5-per cent stake in the field. In a briefing in the Indian capital New Delhi, attended by The Herald, Raha said he was eyeing targets across the world and would pay top dollar for opportunities that seemed to offer the right combination of risk and reward. "We are normally aggressive, " said the chain-smoking oil and gas industry veteran. "There are transactions in process and if we got them all the costs would come to GBP9bn to GBP10bn, " he added, declining to give details of targets. Including the investments required to develop the assets, ONGC is contemplating a total cash sink of GBP14.5bn.

This is a formidable sum but Raha should have little difficulty raising a war chest of that size. With huge reserves of oil and gas in India and overseas, and interests in a variety of businesses like refining, ONGC has a net worth of GBP6bn and no debts. Ministers expect the company to play a key role in the government's efforts to help India meet the energy demands of the country's fast-expanding economy, by broadening its portfolio of assets. Dismissing reports that ONGC wanted to spin off its Videsh arm, Raha said the expansion of the overseas subsidiary would be crucial to meeting growth targets. This has amassed stakes in areas including Cuba and Vietnam. ONGC will also step up its exploration efforts in India, and try to make the most of its existing finds in the country.

In a related development, the director-general of India's hydrocarbon regulatory body said he would visit Aberdeen in January in an attempt to encourage more Scottish oil and gas firms to explore in India. V.K. Sibal said he hoped to persuade firms with experience in the deep waters of the North Sea that could be applied off the coasts of India to bid for exploration acreage in the sixth New Exploration Licensing Policy round (Nelp 6). This will be held early next year. While India has 26 sedimentary basins that could contain recoverable reserves, only six have been assessed in detail, leaving India "hugely underexplored", according to Sibal.

He applauded Edinburghbased Cairn Energy for making a series of bumper finds in Rajasthan in western India. "We explored Rajasthan for 20 years and got nothing, but Cairn came in and explored in their own way and they got a bonanza." Sibal also hopes to attract Scottish exploration and production services firms to India to help the country build up its capability in the area. He will highlight the opportunities available in India at a roadshow for Nelp 6 in Aberdeen.

This will be the last annual licensing round for India, which is moving to an open acreage system from December 2006. Under the new arrangement, firms will be able to bid for any acreage in which they are interested at any time. Sibal wants to simplify the process and ensure the results are transparent to encourage interest from as many firms as possible, including small fry. In some areas India would particularly like to attract investment from giants like Exxon Mobil and BP. "I think personally it's very very important for them to come for the very very deep water, " said Sibal.

Noting BP had bid unsuccessfully for acreage in Nelp 5, he said giants would be assessed on the same criteria as other bidders. Raha, who met Lord Browne, chief executive of BP, in India recently, said ONGC was keen to work with BP. "We reached a great understanding and I am quite sure we will be able to reach agreement on a joint operation, " said Raha. This might involve BP getting stakes in ONGC's Indian assets.

However, any overseas firms that want to reap the reward of ONGC's exploration exploits would be expected to offer the Indian firm a "quid pro quo", in the form of a stake in their own exploration assets. "I don't need the technology, I don't need the money. I don't need the market - that's here, " concluded Raha.

Source: Herald, The; Glasgow (UK)

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