IOC to hive off upstream business
Kolkata   16-May-2011

With petrol prices up nearly 9% and diesel rates poised to rise, state-run IndianOil is planning to revitalise its upstream business and hive it off into a subsidiary as India’s biggest refiner and fuel retailer turns to its growth strategy after struggling with low state-set fuel prices for months.

IOC Chairman RS Butola, who earlier spearheaded India’s mission to buy oil and gas assets abroad, said the company was actively considering strategies to scale up IOC’s exploration business.

The company plans to build a dedicated cadre of exploration and production experts to help it secure crude oil supplies.

We can have another subsidiary for E&P, like ONGC has OVL or we can have an E&P division within IOC for better focus on upstream business, he told ET. IOC has stakes in a dozen of domestic oil and gas exploration blocks besides having equity participation in nine overseas blocks in Libya, Iran, Gabon, Nigeria, Timor-Leste, Yemen and Venezuela. But these ventures have so far not delivered the kind of results IOC was aiming for.

The company was not in a position to invest heavily in the business as selling diesel, cooking gas and kerosene at low state-set rates was bleeding its finances, forcing it to count heavily on government grants to remain profitable. But the situation is changing as the government has allowed state firms to raise petrol prices and a panel of ministers is expected to increase the price of other controlled fuels next week.

Butola brings with him a wealth of exploration experience as he was the head of ONGC Videsh Ltd (OVL) for almost seven years before taking over as chairman of IOC.

OVL was created to specialise in acquiring foreign energy assets and in less than two decades, the company, became India’s number two E&P firm with stakes in 34 oil and gas blocks in 15 countries.

Oil exploration requires specialised knowledge, skills and a dedicated workforce to pursue the business that has high risks and rewards.
But this will not dilute IndianOil’s core focus, Butola said.

“Fuel marketing and retail will remain our core, but E&P will be also an important business activity,” Butola further said.