E. Timor block, spread over 2,384 sq km, has proven reserves.
IOC, OIL each looking at 12.5% equity stake in project.
Participating interest also includes sharing risks involved.
Farm-in activity is common among global oil exploration cos
New Delhi, Dec. 30 Decks have been cleared for two of India’s large oil sector companies, Indian Oil Corporation and Reliance Industries Ltd, to jointly undertake oil and gas exploration abroad.
IOC, along with Oil India Ltd, is now expected to join hands with RIL for exploration in the latter’s oil block in East Timor.
Both the State-owned companies have obtained approval from their respective Boards to acquire equity in RIL’s asset as farm-in partners.
The two companies will now work on a final agreement with RIL. Official sources told Business Line that “the IOC Board which met on Friday approved its participation in the project. OIL Board has already given its nod. The approval of the respective Boards was taken after the technical teams of IOC and OIL expressed satisfaction on the data made available by RIL.”
Stake Count
Indications are that both IOC and OIL are looking at an equity stake of 12.5 per cent each in the project. RIL will hold a majority stake in the block and will be the operator of the area which is spread over 2,384 sq km.
In May 2006, RIL had won a block in East Timor. RIL had bid for two of the 11 offshore blocks tendered by East Timor, but could manage only one contract area. The company had bid for area ‘K’ and area ‘E’, but won only the former.
RIL has now signed an agreement to explore for oil and gas in East Timor and it will explore the offshore area in contract area ‘K’ that has proven reserves in the Australian North West Shelf and is adjacent to the Timor Sea.
This region contains discoveries such as Bayu-Undan (commenced production in 2004) and Greater Sunrise.
Farm in Activity
The State-owned companies have been in talks with RIL for farm-in opportunities for them in the existing overseas assets of RIL.
A farm-in activity, which is very common among global oil and gas exploration companies, allows an entity to come in as a partner.
As a farm-in partner, a company is not required to acquire the asset directly, but develop the property by taking participating interest in the block.
The company also shares the risk involved in the exploration activity with the operator.
Currently, IOC has seven overseas assets (excluding the recent gas blocks acquired in Libya) through consortium approach.
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