Ramachandran: Committed

New Delhi, Jan. 31: Indian Oil will be investing $3.5 million in the Cachar oil exploration block in Assam where it will pick up a 35 per cent stake from Premier Oil of the UK. Chairman M. S. Ramachandran said the investment forms part of the company's strategic plan to move into the upstream sector.

He said while $600,000 would be paid for the equity in the company another $2.9 million would comprise IOC’s share of investment in the exploration block during the first phase. The total investment during this phase by the consortium would be around $8.43 million. Essar Oil owns a 16 per cent stake in the block.

Ramachandran said that PJS consultants of the UK had estimated the recoverable reserves in the block at 3 to 5 million trillion cubic feet of gas and 175 million barrels of oil. This was based on the 3D seismic surveys that had been carried out.

IOC would be free to market the natural gas from the field and the investment fitted in well with its other downstream operations in Assam. In fact, the Digboi refinery would provide the administrative backup for the operations in the block, he added. IOC’s entry also suits Premier Oil as it would not have any marketing problem given the strong IOC presence in the downstream refining segment.

According to the original terms of the contract with Premier Oil, ONGC will have the option of farming in with a 40 per cent stake if oil or gas is struck in field.