Oil India mulls diversification into gas

Company is entering gas transportation mkt,since it already has expertise in laying pipelines.

State-run Navaratna oil explorer Oil India is chalking out an expansion and diversification strategy that could also include an entry into the city gas distribution space.

“We plan to pursue a cautious strategy for our exploration initiative. We are looking for sure-bets,because exploration is a risky activity. Even when it comes to domestic exploration,we intend to bid for the next Nelp auctions very selectively,” Oil India Director for Exploration & Development Baikunta Nath Talukdar said.

The company is considering entering the gas transportation market,since it already has expertise in laying pipelines and transporting gas through pipelines. “We would like to market our gas directly to consumers. We may tie-up with a gas marketing company for this,” Talukdar said.

“City gas distribution and piped gas distribution are potential areas which we have been identified for diversification. That apart,we also intend to tap shale gas,since the price of natural gas is rising,” Talukdar said. With respect to overseas exploration ventures,the company plans to focus its efforts on fields that have already been discovered. Earlier,the company had set aside 40 per cent of its surplus funds for exploration initiatives. Now,that figure has risen to 52 per cent. Oil India also intends to improve recovery from existing oilfields. It is already engaged in increasing the productivity of mature oilfields by inducting new technologies and company has begun horizontal drilling in some fields to enhance recovery. Nevertheless,the diversification strategy will be conservative,with OIL sticking to areas in which it has some expertise,Talukdar said.

Oil India has also picked up a 26 per cent stake in the Numaligarh Refinery,as well as a 23 per cent stake in the pipeline through which it supplies gas to the refinery.

“The pipeline business is attractive. Besides,we already have experience in this area. We also plan to pick up a 10 per cent stake in the Dibrugarh gas cracker plant,to which we will be supplying gas,” he said. The Dibrugarh plant is promoted by state-run Gas Authority of India.

The company has had its share of setbacks. It could not discover oil in its exploration acreages in Libya and the process of relinquishing these blocks is on. It plans to write off the Rs 56.8 crore expenditure incurred on the unsuccessful venture in Libya,a company official said.

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Last week,the company had hinted at a possible asset-buy in Africa by picking up a stake in the exploration assets of Gabonian firm Etablissements Maurel et Prom.

“The block already has a discovery. We have our own people evaluating it,besides experts from other countries. A decision will be taken on our investments in Gabon after a feasibility study,” Talukdar had said.

The company also has a 3.5 per cent stake in a consortium that bought oil wells in Venezuela.

“We will be producing around 400,000 barrels of crude,of which we will be entitled to 14,000-15,000 barrels. Production should begin by the third quarter of calendar 2012. Initial production will be sold or swapped,” Oil India Director Nripendra Kumar Bharali had said.

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The state-run upstream firm has invested USD 450 million in Venezuela’s Orinoco super heavy oil belt. The asset is believed to hold around 3 billion barrels of reserves. Oil India is a part of a consortium that includes Spanish explorer Repsol,ONGC Videsh,Indian Oil and Petroleos de Venezuela SA of Venezuela. However,recoveries under the project are expected to be low,because of the “super heavy” nature of the crude.