Oil India scraps Digboi project

Kolkata As an after-effect of the economic meltdown, Oil India Ltd (OIL) has scrapped its plan to set up a Rs 400-crore pilot coal-to-liquid (CTL) project at Digboi in Assam in a joint venture with Coal India, IndianOil and Engineers India Ltd (EIL).

Plans to enter refining have also been also put on the back burner.

“In the changed scenario, we are focusing on fulfilling our investment commitments in the exploration and production (E&P) business. Also, we are seriously pursuing opportunities to acquire quality E&P assets abroad,” a senior company official said.

“We are no longer pursuing the proposals regarding setting up of CTL and refining cum petrochemicals projects,” he added.

OIL was expected to hold a controlling stake in the coal-to-liquid project, slated to produce 2,500 barrels a day of synthetic oil in the initial phase using coal produced by CIL’s mines at at Margherita in Assam.

The synthetic oil was slated to be refined at the Digboi refinery of IndianOil.

The company was also keen on participating in a consortium of France’s Total S.A., L.N. Mittal Group, Hindustan Petroleum Corporation and GAIL (India) to build a refinery-cum-petrochemical plant at Visakhapatnam in Andhra Pradesh.

The consortium partners have also launched a pre-feasibility study in this regard.

Investments in E&P


Though OIL’s plan to come out with an IPO to finance the investments in the E&P sector is now facing an uncertain future, company sources say that the PSU major was not considering to raise debt-finance as yet.

“We have no immediate plan to borrow and expect to finance the entire Rs 2,300 crore investment commitments in the E&P sector in 2009-10 through internal accruals.

“However, considering the fact that we have a debt free balance-sheet with Rs 7,000 crore in reserve, we may resort to borrowings, if need be,” the source said.

NELP blocks


OIL has interest in 25 NELP blocks and 16 nomination blocks in India and 14 overseas blocks. The company has operating interests in 12 onshore NELP blocks in India and six exploratory assets abroad.

According to sources, OIL’s cash call in the E&P activity is expected to move up steadily beginning 2009-10 as a number of the exploratory assets held by the company in India and abroad will enter the drilling phase.

The company will shortly launch a four-well drilling campaign in Area 86 and 102 in Libya.

IndianOil holds 50 per cent participatory interest in both the blocks.