RIL,OVL to bid jointly for oil blocks in Iraq

In a bid to leverage their oil exploration and production expertise, Reliance Industries (RIL) and ONGC Videsh (OVL), the overseas investment arm of Oil and Natural Gas Corporation (ONGC), are planning to jointly bid for oil and gas blocks in Iraq.

The two companies are already renegotiating for a stake in the Tuba field and the Block-8 in western Iraq.

OVL, Reliance and Algeria's Sonatrach were in talks with the Saddam Hussein regime before the US took over Iraq in 2000. The UN sanctions that came in after 2000 prevented further talks from talking place.

"We are ready to partner OVL in overseas search for oil and gas exploration blocks. OVL is in the process of getting approval for a joint business with us," a senior Reliance official said. OVL official declined to comment.

The Reliance official, who preferred not to come on record, said since the two companies are already renegotiating for blocks in Iraq, it makes sense to start buying into new blocks in the same country.

The Mukesh Ambani controlled company, which is the country's most valuable company is in terms of market capitalisation, is also seeking oil and gas blocks in Kurdistan.

The company is likely to tie-up with OVL and Kurdistan's national oil companies for stake in oil blocks in the region. It is also considering for buying blocks on its own.

In January 2005, Iraq opened its oil reserves to the world with the interim council of ministers inviting foreign oil companies to develop potential fields. Iraq, with proven oil reserves of 112 billion barrels, is the world's second largest producer, behind Saudi Arabia.

A sector analyst said while Iraq is sitting on a heap of oil, tackling the geopolitical risks will be the primary concern of the oil companies investing in Iraq. "Under the ground risks are low, over the ground risks are very high," he said.

Analysts, however, are optimistic about Reliance's chances in Kurdistan and Iraq. When India's largest upstream company, ONGC, had entered Sudan in 2003, that country was under US sanctions. "The Indian government still took the risk and it has paid off," the analyst said.