Vertical integration will boost financial power of Indian oil firms: Oil India
Vertical integration of public sector oil companies will enhance the financial power of Indian oil firms to get acquisitions overseas and discussions on the issue will begin soon, a top official of a Navratna oil firm has said.
“It (vertical integration of public sector oil companies) will increase the financial power of a company to get acquisitions overseas. I think this is one of the main reasons,” Utpal Bora, Chairman and Managing Director of Oil India Limited, told PTI.
“I understand that discussions in this regard would be held soon,” said Bora who was here last week to attend the annual CERAWeek 2017 in Houston, the top gathering of who’s who from the global oil and gas sector.
Bora refrained from giving any further details on the nature, scope and timeline of such a merger.
“The only thing I know so for that it was announced in the budget. This is a good idea which would help India’s oil and energy sector, but details are yet to be chalked out,” he said in response to a question.
Noting that the “pros and cons” of such a move are yet to be discussed, Bora said that the business model and culture of all the public-sector oil companies in India are different.
“So I think, it will have to be a very well thought out process,” he said, adding that a lot of things need to be taken into consideration to ensure seamless merger of Indian oil companies.
“It’s a good idea,” he said, adding that in the 21st century financial power of companies are very important.
“If two or three companies merge, we will have more financial powers to acquire overseas,” he said emphasising that this is very important for energy security.
In recent years, Oil India Limited (OIL) has invested in acquiring properties overseas including the one in the US, Myanmar, Russia, Mozambique, Gabon and Nigeria.
Due to unforeseen circumstances, the investment of $1.2 billion in Mozambique has not yielded expected results so far, he said.
In the US, OIL has 20 per cent stake in Houston-based Carrizo Oil.
OIL, which contributes around eight per cent of the country’s oil production, and 10 per cent of the gas, Bora said it is important to sustain the production, if not increase it given that its oil well are very old. It’s based mostly out of Assam and Arunachal Pradesh.
“Recently we succeeded in arresting the decline in oil production,” he said, adding that OIL is planning to develop its property in Rajasthan to add to the country’s oil and gas production.
“We are planning to bring in new technology to produce heavy oil,” Bora said, adding that exploration is going on in Andhra Pradesh.
The advent of new Hydrocarbon Exploration Licensing Policy or HELP, he asserted would help India to increase its oil and gas production in the coming years.
“In Assam, there are a few areas which could be very prospective. So we will bid for that and if we get that then we could probably increase the production,” he said, adding that some potential production areas in Assam and Arunachal Pradesh are being held up because of clearances on the account of forest and environment.
“Once those clearances come, we would be able to increase our production,” Bora said.
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