Indian Oil Corporation may buy minority stake in Canada Shale Gas & LNG Project for $1 billion
New Delhi   05-Feb-2014

State-run Indian Oil Corporation (IOC), country's biggest refiner and fuel retailer, plans to acquire a minority stake in a Canadian shale gas and liquefied natural gas project for about $1 billion. The Cabinet is expected to approve it this month, senior government and industry officials said. The company is in advanced talks of negotiations for the assets that include a 10% stake in Progress Energy Resources Corporation, officials with direct knowledge of the matter said.

"The preliminary due diligence exercise is almost over. The proposal has been discussed with top government officials before seeking approval of the Cabinet Committee on Economic Affairs (CCEA) by the end of February," a senior government official said requesting anonymity. IOC chairman RS Butola said the company was looking for "several opportunities overseas including Canada," but declined to comment on specific deal until an agreement was signed.

According to government and industry sources, oil secretary Vivek Rae had convened an urgent meeting last week at the headquarters of IOC to discuss the proposal.

Rae heads an empowered committee of secretaries that examines and recommends IOC's overseas acquisitions before seeking CCEA's approval. Secretaries of finance, foreign, law, department of public enterprises and Planning Comission are its other members. "The proposal has inprinciple approval of the empowered committee," an official said. The panel facilitates inter-minisby terial consultations on overseas acquisition proposals and makes recommendations to CCEA directly to avoid delays. According to officials, IOC may rope in other state-run oil companies to acquire Canadian shale gas and LNG assets of Progress Energy.

Malaysian oil major Petronas had acquired Progress Energy last year for about $5.2 billion. Progress Energy has shale gas assets in northeastern British Columbia and its sister concern, Pacific NorthWest LNG is planning to build an LNG export facility on Canada's west coast. Petronas recently sold a 3% interest in Progress Energy's gas assets and the LNG export facility to Petroleum Brunei.

IOC is expected to follow the same model. Earlier in April, Japan Petroleum Exploration Company had acquired 10% interest in the Canadian shale gas and LNG projects for an undisclosed amount. Progress Energy is producing more than 350 million cubic feet gas per day in northeast British Columbia and northwest Alberta. IOC's proposed acquisition would be the third major overseas acquisitions by India's state-run oil firms in the current financial year involving deal size of $1 billion and more. India is focusing on acquiring stakes in producing oil and gas fields and exploration blocks abroad to secure fuel supply for energy deficient country, which imports 80% of crude oil it processes.