Oil India Ltd and Indian Oil Corporation are likely to close their Mauritius-based special entity floated for acquiring oil and gas acreages overseas.

A senior OIL official told Business Line that “we may close it down as the entity is not having any utility value.”

Ind-Oil Overseas Ltd, the special entity jointly floated by IOC and OIL, was to look at prospects in CIS and African countries.

In 2005 the companies had got Cabinet approval to set up a project-specific “special purpose vehicle” (SPV). The 50:50 venture was set up in 2008. The decision to set up the entity in Mauritius was prompted by the tax benefits the country offered.

Till date the entity has not acquired any acreage. The companies had kept the capital base in the SPV at the minimum. However, this venture does not restrict the OIL-IOC from adopting a consortium approach when required. Both IOC and OIL preferred to adopt a two-model approach to acquire oil and gas assets.

By keeping the consortium option open, OIL could also consider roping in other partners in assets that do not interest IOC.

While under the SPV route the burden would not be on the parent companies' balance sheet, the advantage of a consortium approach would be that the companies would enjoy tax benefits extended to exploration activities, industry experts said.

The two together have assets in six countries – nine blocks in Libya, two in Yemen, and one each in Iran, Nigeria, East Timor and Gabon (West Africa).

During, FY 10 OIL in consortium with ONGC Videsh Ltd, IOC, Repsol YPF of Spain and Petroliam Nasional Berhad (PETRONAS) of Malaysia was awarded 40 per cent ownership interest in a Mixed Company to develop two blocks (under one project) in Orinoco Heavy Oil Belt, Carabobo, Venezuela.

The Corporacion Venezolana del Petroleo, a subsidiary of Petroleos de VenezuelaS.A., Venezuela's national oil company, holds remaining 60 per cent equity interest. OIL's Participating interest is 3.5 per cent. The first oil is expected to be produced by 2012.

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