OiI India to buy Shale Gas assets worth $200m

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State-run Oil India Ltd (OIL) is looking to buy Shale Gas assets worth up to USD 200 million and is scouting for potential acquisitions globally, TK Ananth Kumar, the company's director(finance) told CNBC-TV18.

Oil India's shares reacted to the news and were up around 1% to Rs 1,160, while the broader benchmark index was down 0.21% to 16,120.77.

He further said that the company has Rs 13,500 cash on its books and the company is willing to use around Rs 6,000 crore which will be used to acquire upstream assets.

OIL is keen to tap into its Shale Gas resources to meet rising gas demand from power plants and factories. Oil India joins other Indian companies-such as Reliance Industries Ltd . and GAIL (India) Ltd . which have already acquired acreage in the US-to get technology for exploiting the natural resource and secure fuel supplies.

Below is the edited transcript of Kumar's interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video.

Q: Are there any plans afoot to buy Shale Gas assets or any other oil ventures abroad? What is on the shortlist and what can we expect by when?

A: As per our strategy, we have been looking for shale gas as a possible entry. In this regard certain we are looking at assets, it is in the initial stage. We have already lined up our strategy to acquire Shale Gas as a JV partner up to a maximum limit of USD 200 million.

Q: But have you identified parties and how soon can we expect a decision?

A: We have identified a couple of opportunities. The process is still going on. It will take some time for us to crystallize the whole thing.

Q: The other news piece is the plan of Oil India to buy stake in the Gabon blocks. Can you tell us about that and what's stage of finalization is that plan?

A: Even that is in advance stage at the moment since the news is already there for quite some time. We are still in discussions and are likely to take it forward.

Q: If these discussions do fructify then how much will this help increase your overall production base by and what is the total amount of cash reserves that Oil India is willing to pump into acquisitions like these?

A: We are having cash to the extent of almost USD 2.6 billion. We have been actively looking for acquisitions for quite some time. We can plan to invest around Rs 4,000-6,000 crore for investment in oil and gas and also in Shale Gas assets.

Q: What is the cash on your books at this point in time? My understanding is that you have considerable cash surpluses. So what have you set aside for capex and have you been approached by the Disinvestment Ministry or the government in any fashion to buyback either your own shares or shares of other PSUs?

A: At the moment, we have cash around Rs 13,500 crore. We haven't yet been told about buyback or crossholdings as part of our disinvestment.

Q: What are your capex plans out of this Rs 13,500 crore? If you have not been approached for a buyback or crossholding have you been approached for dividend?

A: We have been asked about our payout ratio over the past few years. We have also been asked whether we can pay some interim dividend inline with earlier years. We have already paid 250% interim dividend in January. Any further dividend, we said we will go back to board and come back.

Q: Can you give us some idea, what it might be and by when we will know?

A: No. It is a board decision so we will not be able to tell you anything about it.

Q: The other issue is the higher subsidy sharing for the next half of the fiscal. If that does come through and it's higher than the 33% - what kind of a realization will Oil India manage to do by the end of this fiscal and in FY13 as well ballpark?

A: We have shown growth in the current year also in production. At the moment we are growing around 7-8% in production of crude oil and more than 10% in gas. As of December, we are still in 33% bracket. We have been telling government that we have huge investment outlays and it should not be increased beyond 33%. We will have to wait and watch what is the outcome for the fourth quarter.

Q: Can you tell us what could the rate of return look like on this Gabon acquisition? How will it help to increase your overall production base and how will it help to increase your reserves? Where are they at currently and post this what will it do to your reserves?

A: It is too early for me to say anything about it.

Q: Can you give us a timeline?

A: We are working on it. It will take some time.