economics

March 15, 2010

India Joins Global Search For Oil and Gas Properties

Filed under: Uncategorized — ktetaichinh @ 9:03 pm
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NEW DELHI—India wants to join the club of global energy giants.

Some of the country’s largest private and state-run firms are in hot pursuit of oil and gas assets overseas as they seek to take advantage of depressed asset prices during the downturn and break free of burdensome regulations at home.

In the latest move, oil-to-textiles conglomerate Reliance Industries Ltd., run by billionaire Mukesh Ambani, raised its bid over the weekend for LyondellBasell Industries, a bankrupt petrochemical maker and oil refiner. The new bid values the Netherlands-based firm at $14.5 billion, according to a person familiar with the matter.

A Lyondell spokesman declined to comment. A Reliance spokesman declined to comment.

Reliance also is scouting other foreign targets, including Canada’s Value Creation Inc., which has large oil-sands deposits in Alberta, people familiar with the company’s thinking said. Smaller rival Essar Group is stepping up its own bargain hunting abroad, with an eye on assets that Royal Dutch Shell PLC and other oil majors are unloading.

In recent months, Reliance and Essar, both based in Mumbai, have hired top executives from global oil majors to aid their international expansion efforts. Meanwhile, India’s flagship state-run oil company, Oil & Natural Gas Corp., said recently it may spend as much as $30 billion over the next decade on an international acquisition binge.

Indian companies are scouring the globe to secure crude resources and reduce their dependence on imported oil. India imports 70% of its oil, with a price tag of more than $90 billion annually. The companies are also looking to expand their global footprint with refineries and other assets in far-away markets. And they want relief from the regulatory headaches of their home turf, where government influence in exploration and pricing of natural resources has slowed expansion.

“There’s too much political and regulatory baggage at home, and in the current environment, corporate India sees a lot of bargains overseas,” said Cyril Shroff, managing partner of Amarchand Mangaldas, a top Indian law firm that advises companies on mergers and acquisitions.

India is likely to face competition as it shops for oil and gas, especially from Chinese firms. Last summer, Sinopec Group, a large Chinese oil company, paid $7.2 billion for Addax Petroleum, a Geneva-based company that has oil and gas assets in the Middle East and Africa.

“We see the international players being more often the buyers of these types of assets now, and there’s no reason to think that won’t continue,” said Jon McCarter, oil-and-gas transactions leader for the Americas at Ernst & Young.

A deal with Lyondell would significantly advance the ambitions of Reliance’s Mr. Ambani to build a global energy conglomerate. It would create a behemoth with $80 billion in combined revenues and interests in oil-and-gas exploration, refining and petrochemicals used for food packaging to textiles.

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