Essar Oil scouts for buyers of its stake in three overseas oil blocks

The Ruias-controlled Essar Oil plans to divest stakes in its three oil blocks in Vietnam and Australia to raise funds for exploration and production (E&P). The company made the offer to public sector oil firms including Oil India (OIL) through a letter to these companies.

“Essar would require about $150 million (about Rs 750 crore) for hunting oil and gas in its assets acquired overseas. Of this, about $130 million will be used for the E&P in Vietnam and Australia. The company plans to invest about $60 million in the gas-bearing offshore block in Vietnam’s Song Hong basin and $70million in the two shallow-water blocks in Bonaparte basin in northern Australia,” said informed sources.

Essar Oil spokesperson said, “As a group we always look at opportunities for farming in and out.” However, a highly placed source in OIL said, “We got a letter from Essar, seeking our interest in buying stakes in three overseas hydrocarbon assets. The development group in OIL is reviewing the proposal and a decision will be taken in a week.”

The officials from OIL and Essar met in the first week of February in Delhi and discussed about the deal, said sources.

In March 2008, Mauritius-based Essar Exploration & Production (EEPL), a subsidiary of Essar Oil, had bagged the block in Vietnam that covers around 5,925 sq km and is located at water depth of 60-70 meter, with early estimates indicating reserves of 2-3 trillion cubic feet natural gas.

EEPL had bagged two offshore petroleum exploration blocks NT/P77 and NT/P78 in the northern basins of Australia in November 2008. International giants Chevron, Exxon Mobil were also in the race for these blocks. Essar will be free to bring in the oil and gas to India.

The E&P business of Essar has participating interests in several hydrocarbon blocks, including the Ratna and R-Series blocks on Bombay High and Mehsana block in Gujarat. It controls a coal-bed methane (CBM) block at Raniganj in West Bengal, and two more blocks in Assam.

Recently, it won a block in Mumbai offshore under the seventh round of bidding in new exploration and licensing policy (NELP VII). The other overseas E&P assets include three onshore oil and gas blocks in Madagascar (East Africa), and one offshore block in Nigeria.