Date:16/12/2004 URL: http://www.thehindubusinessline.com/2004/12/16/stories/2004121602320200.htm

Back IOC to buy 50% stake in Iranian gas block

Our Bureau

Mumbai , Dec. 15

INDIAN Oil Corporation Ltd has said that it has committed a $1-billion investment to buy 50 per cent equity stake in a 9-million tonne Iranian liquefied natural gas (LNG) block.

IOC, which will ally with Oil India Ltd for investing in the project, will be able to directly sell 4.5 million tonnes (mt) of the LNG produced from the block and will also have the first right of refusal for the remaining 4.5 mt.

The company has signed an initial agreement with Petro Pars, an arm of National Iranian Oil Company, to explore the block. They will immediately begin work on an exploration master plan that will be completed by February, Mr M.S. Ramachandran, Chairman and Managing Director, IOC, said here on Wednesday.

"It is an ambitious task and we expect in-principle clearance to develop the block through National Iranian Oil Company. IOC will be able to directly sell 4.5 mt of the LNG produced from the block and will also have the first right of refusal for the remaining 4.5 mt," Mr Ramachandran told reporters on the sidelines of the fourth international conference on industrial tribology, which is the study of friction, lubrication and wear.

He said the Indian investment in the $5.7-billion project would be about $1 billion. The investment, with a debt-equity ratio of 2:1, would be funded out of IOC's Rs 23,000-crore reserves or by selling IOC's holdings in ONGC and GAIL India.

IBP merger: Mr Ramachandran said the company's board of directors would meet on December 22 to decide the swap ratio for the proposed merger of its subsidiary IBP Ltd with IOC.

IBP's board will discuss it on December 17, he said.

Gross refining margins down

Mr M.S. Ramachandran, CMD, IOC, said the company's gross refining margins have come down by $3-$4 a barrel.

IOC expects to end the financial year with an average gross refining margin of $5 a barrel compared with the previous year's $4.8. Margins touched a high of $8.5-$10 a barrel in the last quarter.

"The average annual refining margins would depend on international crude price movements and the severity of the winter," Mr Ramachandran said.