IndianOil diversifying into upstream sector

"We are always on the look out for acquisitions"

IndianOil, the country's largest oil marketing company, is
diversifying into new businesses in the upstream sector. At the same
time, IOC is facing tremendous liquidity pressure due to rising
under-recoveries and lack of clarity in getting compensation from the
government. Mr. Brij Mohan Bansal, Chairman, IndianOil, spoke to
Siddhartha P. Saikia at the twelfth International Energy Forum in
Cancun, Mexico, about the navratna company's roadmap to emerge as an
integrated energy company.

Excerpts from the Interview:

IndianOil is getting active in upstream sector overseas. How do you
plan to compete with Chinese and other leading global oil firms in the
international market?

Global majors are integrated energy giants. In order to bag good
assets, a company must be extremely cash-rich, which we are not. We
are following a normal procedure and leveraging out best capabilities.
Though, the gestation period is long, projects overseas give good
results.

If our financial health improves, we will move forward more
aggressively to acquire oil and gas assets globally.

On one side IndianOil is facing the pressure of rising
under-recoveries. On the other hand, you are investing in upstream
projects. How do you maintain equilibrium between the two?

IndianOil as a company cannot do much in terms of getting compensated
against under-recoveries.

At the same time, government has also some limitations. We will have
to work under these conditions, try to grab the best possible
opportunities wherever available.

India is planning a sovereign fund that will help public enterprises
in foreign acquisitions. How will IndianOil benefit from such a
scheme?

A sovereign pool of fund is very important for oil companies to be
successful in the global arena. Energy deals are always big-ticket
transactions. If we get access to funding immediately, it will speed
up projects and also help the company seal new deals.

What is your agenda at this conclave of energy ministers and companies
from 60 nations?

We are always on the look out for acquisitions. Due diligence is an
ongoing process. But we are concentrating on two to three projects.
IEF is a good platform where we can discuss options that will be
profitable in the long run if not in the immediate future.
How do you see crude prices moving in the new financial year?

No one can predict in which direction crude prices will move. Crude
prices have been range-bound between $60 and 80 per barrel for some
time now. But, I feel it will move forward and touch $90 per barrel.
It should be in the range of $80-$90 per barrel.

What is your estimate for under-recoveries in the new financial year?

Under recoveries in 2010-11 will be very high. At present, the average
crude price is around $70 per barrel. It may be close to $80 in the
new year.

The Indian government must do something: either increase the price of
subsidised fuel or compensate oil-marketing companies in full.
By Siddhartha P. Saikia, 31 March 2010