New Delhi: Indian Oil Corp., the country's second-biggest refiner, plans to acquire oilfields in Africa as part of a $1 billion (Dh3.6 billion) overseas investment plan, its chairman said.

"Africa is top of our list to buy assets because it is near India and has good quality crude," Brij Mohan Bansal said in an interview at his office in New Delhi yesterday. "We are planning retail outlets in Indonesia."

State-run Indian Oil's renewed plans to expand overseas came after the government freed gasoline prices from its control last month and said it will eventually allow refiners to set diesel rates, helping to increase cash flow.

The refiner has set aside $1 billion for acquisitions overseas, Bansal reiterated.

"Africa offers many grades of crude and gives refiners security of supplies to have fields there," said Vinay Nair, a Mumbai-based analyst with Khandwala Securities Ltd.

"They will however still need financial support from the government to help make profits."

Reduced cash flow

The refiner delayed crude-processing and pipeline projects overseas, including Nigeria and Turkey, because of reduced cash flow after selling fuels below cost, Bansal said last year.

Indian Oil and Turkish builder Calik Holding had planned to spend $4.9 billion to build a 300,000 barrel-a-day refinery in Ceyhan on the Mediterranean coast.

The companies, along with Italy's Eni SpA, Europe's fourth-largest oil company, had also planned to spend $2 billion on a pipeline from Samsun on Turkey's Black Sea coast to Ceyhan to transport as much as 1.5 million metric tons of Central Asian crude oil a day.

The shares have increased 23 per cent in Mumbai trading this year compared with the 3 per cent gain in the benchmark Sensitive Index of the Bombay Stock Exchange. The stock declined 3.8 per cent to Rs374.45 yesterday.

Indian Oil, which owns stakes in ventures in Africa and the Middle East, had plans to invest in refinery and pipeline projects in Nigeria, former company spokesman M. Kali Krishna has previously said . The Economic Times reported then that the company may invest $3.5 billion to build a 300,000 barrel-a-day crude processing plant in the country.

The refiner holds shares in exploration ventures in countries including Iran, Nigeria and Venezuela. The projects are yet to produce oil.

India's crude imports increased 20 per cent to 153.2 million tons in the year ended March from a year earlier, according to the oil ministry's data. The nation's energy use may more than double by 2030 to the equivalent of 833 million tons of oil from 2007, the International Energy Agency said.

"Deregulating fuel prices helps us increase cash flows and profitability," Bansal said. The refiner currently has debt of Rs470 billion, he added.

Solar power

Indian Oil plans to revive a Rs200 billion ($4.3 billion) chemical project in the eastern state of Orissa and build nuclear, wind and solar power plants as cash flow increases, Bansal said.

"We will bring the petrochemical project out of the cupboard again since there is more clarity about our finances now," he said. "We want to become an integrated energy player and will spend on renewables."

The refiner plans to build a 1,400-megawatt nuclear power plant in the state of Rajasthan at a cost of Rs120 billion in partnership with Nuclear Power Corp. of India. Indian Oil would own 26 per cent in the venture.

  • $4.9b: cost of planned Indian Oil and Salik refinery
  • $3.5b: cost of planned plantin Nigeria
  • $4.3b: cost of reviving chemical project in Orissa