IOC wants to offload stakes for Iran block

Intends to dilute it's stake  in ONGC, GAIL.

Indian Oil Corporation (IOC) had approached the government for permission to sell its equity in GAIL India and Oil and Natural Gas Corporation (ONGC), the company's chairman and managing director, MS Ramachandran, said here today.

IOC will use the proceeds to fund the development of a liquefied natural gas (LNG) block at South Pars in Iran. The company has signed a memorandum of understanding (MoU) with Petro Pars, a National Iranian Oil Company arm, to develop the gas block. It intends to rope in Oil India Ltd for the venture.

Ramachandran said IOC had more than Rs 23,000 crore in reserves. "Raising funds for the project will not be a problem. We have already approached the government for the sale of our stakes in GAIL India and ONGC," he said.

Ramachandran said on the sidelines of an industry function on tribology (precision engineering): "We are working on a masterplan that will be submitted by the end of February. It is an ambitious task and we expect a clearance in principle to develop the block from National Iranian Oil Company."

The project with a debt-equity ratio of 2:1 will require an investment of around $5.7 billion, of which IOC will have to shell out $1 billion.

A high-level delegation, which visited the block recently, will submit a detailed feasibility report in February. The delegation returned last week from Tehran.

The LNG block has in-place reserves of about nine million tonnes per annum. In this block, IOC will be able to sell 4.5 million tonnes per annum of LNG, while it will also have the first right to sell the remaining gas from the block.

On the merger of IBP with IOC, Ramachandran said, "The swap ratio for the merger will be taken up at a meeting on December 22." However, the IBP board is expected to meet on December 17.

IOC's total borrowings at the end of November 2004 stood at Rs 17,000 crore, 70 per cent up from Rs 10,000 crore in April 2004.

IOC is expected to report a fall in its gross refining margin in this quarter. The company had a refining margin of almost $10 a barrel in the last few quarters, but now expects an average refining margin of around $5 a barrel by March 2005.

Ramachandran said: "We enjoyed a good refining margin in the past few months. But the gross refining margin is expected to come down by at least $3-4 per barrel. For the whole year, the company expects it to be around $5 per barrel." In 2003-2004, IOC's average refining margin was around $4.8 per barrel.