Indian oil firms focus on production in fight for foreign assets

Sun Dec 2, 2012 3:57pm EST
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By Jo Winterbottom

NEW DELHI Dec 3 (Reuters) - Faced with soaring demand, stagnant output at home and a need to diversify from Iranian crude imports lost to Western sanctions, Indian oil companies are hungry for deals like ONGC's Kashagan buy that promise supplies sooner rather than later.

State-run ONGC Videsh has agreed to pay about $5 billion for 8.4 percent of the Kashagan field in Kazakhstan, the world's largest oilfield discovery in four decades - which could boost its output by about 16 percent within a year.

The deal adds to a stable of assets that span some of the trickiest territories in the world - Sudan, Iran, Iraq, Syria and Libya among them - accumulated as parent Oil and Natural Gas Corporation (ONGC) struggled with domestic output.

But it's a drop in the ocean for the world's fourth-biggest crude importer - it buys in 3.5 million barrels per day (bpd) - where the energy gap triggers constant power cuts. Asia's third-largest economy plans to hit 8 percent growth in 2014/15 and by 2030 that could lift it to be third-largest in the world and also the No. 3 energy consumer, according to BP.

Oil supplies have become more urgent as Western sanctions over nuclear projects squeeze Iran, once India's second-biggest supplier. India's imports from Tehran slipped by nearly a fifth to 257,000 bpd in April-September.

"Our priority is to look for discovered, developed and producing assets which give us production growth immediately," T.K. Anantha Kumar, head of finance for Oil India, the country's other state-run explorer, told Reuters.

While not all the oil bought overseas turns up in domestic refineries, it can give companies a stake in the global crude trade, enhancing their flexibility for supplies and potentially helping profits.

ONGC Videsh said in its 2011/12 annual report that its tough production targets - 20 million tonnes of oil equivalent by 2017/18 and 60 million tonnes by 2029/30 - mean it "needs to concentrate on acquiring assets in (the) development and production phase initially" before looking at exploration acreage.   Continued...