Mittal eyes 50% stake in HPCL subsidiary

Deal pegged at Rs 200 crore.

Steel baron Lakshmi N Mittal is in talks with financial institutions to buy out 50 per cent in Hindustan Petroleum Corp's exploration arm Prize Petroleum, sources close to the development said.

The size of the deal is said to be about Rs 200 crore.

Mittal has made rapid advances in the oil business in India this year first with a 49 per cent stake in HPCL's Bhatinda refinery and then partnering the state-run firm for another refinery on the east coast.

"He has looked at a few firms but nothing is finalised just now," sources said.

Besides Mittal, Essar Oil, Jaiprakash Associates and L&T are other firms interested in buying a 50 per cent stake in Prize Petroleum.

Prize operates the Cluster-7 field of Oil and Natural Gas Corp (ONGC) and won two exploration blocks in the fourth and sixth auctions under the New Exploration Licensing Policy (NELP).

The company plans to produce about 50,000 barrels of oil per day from Cluster-7 fields and believes a block it won in the NELP-VI round in Madhya Pradesh holds three trillion cubic feet of gas reserves.

ONGC had found gas in a well drilled in the basin, but could not test the discovery. The block was then offered for bidding in NELP-VI and was won by Prize in association with Jaiprakash Associates.

Prize is the operator of the block with 10 per cent stake and Jaiprakash has the remaining 90 per cent.

For Cluster 7, which is estimated to hold recoverable reserves of 180 million barrels, Prize roped in Malaysian company M3nergy for pumping oil from the field that ONGC considered "marginal".

ONGC will get a 45 per cent share of oil from the fields as royalty and will pay Prize Petroleum $35 per barrel for the remaining 55 per cent.

The entire $450 million cost of development will be borne by Prize.