India's IOC seeks exploration firm

By Neil Chatterjee and Nidhi Verma

NEW DELHI (Reuters) - State-run Indian Oil Corp. (IOC) is looking to buy an exploration firm to feed its refining capacity as it expects strong refining margins and domestic fuel demand growth this year, its chairman said on Thursday.

IOC (IOC.BO: Quote, Profile, Research, Stock Buzz) aims to produce oil and gas from its own resources totaling 5 million tonnes of oil equivalent a year by 2012 as it expands its refining capacity, and will increase crude imports to 60 million tonnes from around 40 million now.

"Obviously if you have to have equity oil of up to 5 million tonnes in next three to five year, we must have to look at buying some producing assets," IOC chairman and managing director, S. Behuria, told the Reuters Global Energy Summit.

He said IOC was re-examining its goal because of the time required between getting an exploration block and producing oil.

In the past IOC had attempted to acquire French firm Maurel & Prom (MAUP.PA: Quote, Profile, Research, Stock Buzz) and Canadian firm Niko Resources' (NKO.TO: Quote, Profile, Research, Stock Buzz) assets in India and Bangladesh. Its latest effort was for Burren Energy's BUR.L Congo assets. But nothing had materialized.

"Unfortunately at the time when we are active and aggressive the price of crude oil is very high, so everything has to be at right price. We have to do a very elaborate due diligence and negotiation...in fact we have higher hurdle rate for investment in exploration and production than a normal domestic investment because of the risk associated," he said.

The need to buy an exploration company also stems from Libya's decision in one licensing round to bar IOC for lacking experience in exploration and operatorship.

Behuria did not specify any timeframe and budget for buying overseas exploration assets.  Continued...