Oil & Gas Companies Go Shopping
Dec. 3 – The value of global oil and gas companies has decreased in the last year due to the ongoing economic downturn making it an opportune time for Indian companies to buy global assets as well as global wealth funds particularly from China, the Middle East and Singapore to buy oil and gas assets in India.
“With the ongoing economic downturn and the resultant crash in oil prices, the valuation of oil and gas companies has decreased and this offers Indian companies the opportunity to buy global assets at more reasonable prices than earlier.” Dilip Khanna, partner, Ernst & Young’s oil & gas practice told the Financial Express.
Low valuations have already spurred ESSAR Exploration & Production to buy two offshore petroleum exploration blocks in Northern Australia. According to the Economic Times the overseas E&P assets include three onshore oil & gas blocks in Madagascar-Africa, and one offshore block each in Vietnam and Nigeria.
While Indian energy companies go shopping abroad, the government has relaxed rules and regulations for investors, thereby increasing investment in the sector. The government has initiated the New Exploration Licensing Policy (NELP) which seeks to facilitate investments for development of new energy supply particularly from Private Indian and foreign Oil & Gas companies. Nearly 162 blocks have been awarded in the first six rounds of NELP in which exploration investments of US$ 10 billion is expected to take place by 2010.
Elaborating more on Nelp, Khanna, told the Financial Express, “Nelp has been instrumental in attracting private sector and foreign investment to the domestic upstream segment. In the seven rounds of bidding conducted so far, 207 blocks have been awarded to various players who have made a cumulative investment commitment of nearly US$10 billion. Unexplored acreage in the country's total sedimentary area has dropped from 41 percent in FY '99 to 15 percent in FY '07.”
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