GSPC plans arm for equity interest in oil blocks abroad

Gujarat State Petroleum Corporation Ltd (GSPC) is all set to launch its overseas investment and acquisition arm.

The energy major from Gujarat is planning to set up a subsidiary like ONGC Videsh, to acquire equity interest in oil and gas blocks worldwide.

D J Pandian, managing director, GSPC, said, "We are carrying out due diligence of the proposal, and it will soon go to the board for its appraisal." GSPC, which is currently engaged in natural gas trading and distribution, is now working on securing supply of hydrocarbon resources by picking up stakes.

With its exposure in natural gas trading, the company is expected to take more interest in natural gas blocks. Although, GSPC is not into crude refining, its participatory interest in any oil block would offer the company a major trading opportunity.

With the markets for crude and natural gas becoming increasingly volatile, security of supply has become a must for companies to survive and grow, said a GSPC official. Industry sources said the company is eyeing some blocks in Oman, Qatar, Libya, North Africa and Australia.

In the Middle East region, some blocks are also open for an immediate investment opportunity. Australia has just invited bids for some new blocks for investment. GSPC may face tough competition in Australian blocks. But African blocks like the one recently announced by Nigeria offer the company's better chances.

Sudan is another investment opportunity for potential investors like GSPC, which is planning to invest in this overseas investment venture along with some partners. The sources said GAIL is keen on joining GSPC.

"If it works out, GSPC may float a joint venture with the likes of GAIL or our other partners in oil and gas exploration and production in Gujarat and elsewhere in the Krishna-Godavari (KG) basin. But if this does not materialise, GSPC would float its own wholly-owned subsidiary for the acquisition purpose," a source said.

GSPC and GAIL have been working together in the oil blocks in Gujarat. The two companies also share exploration block in the Cauvery basin block in Tamil Nadu. At the same time, GSPC has an equity stake in the KG basin, where it has just discovered nearly 30 trillion cubic feet of gas.

The company plans to invest $345 million in the KG basin exploration, which is being developed in association with Canada's Geoglobal Resources and Jubilant Enpro. GPSC has not decided on how much funds it would allocate for its new venture, said the sources.

However, raising funds would not be an issue for the company as funds become available for the prospective blocks even otherwise, said the sources.