Ahead of its public issue that opens on Monday, Oil India Ltd has pressed for extension of its expired Petroleum Exploration Licenses (PEL) for 15 blocks, without which it cannot hunt for hydrocarbons.
The country's second-largest PSU explorer is engaged in exploration and development activities in 16 independently held blocks, covering an area of 5,367 sq km.
However, its PELs in respect of 15 of those blocks (covering about 4,997 sq km) have expired, which forbids it from commencing or conducting further exploration activities.
"Our PELs in respect of 15 of the 16 independently held blocks have expired; there can be no assurances that we will be granted extensions of these PELs and, consequently, that we will not lose our nomination for these blocks," OIL said in its red herring prospectus. "Although we have applied for extensions of the PELs, we are currently awaiting approval from the Government of India for such extensions. If we fail to obtain extensions of the expired PELs, our business could be adversely affected," the company said.
A PEL is an exclusive right granted by the Government of India to oil explorers, allowing them to carry out geophysical surveys and drilling operations for the area covered under it. Over 90 percent Oil India's blocks are scattered in the northeastern states of Assam and Arunachal Pradesh.
In Assam, the company requires licenses for acreages in Dirak, Sadiya, Margherita, Tinsukia, Borhat, Murkongselek and Dibrugarh among others. While in Arunachal Pradesh, the Deomali, Jairampur and Namchik acreages are in want of a petroleum exploration license. The company is awaiting grant of PELs for block KG-ONN-2004/1 in Pondicherry and block RJ-ONN-2005/2 in Rajasthan from the respective state governments, the offer document said. Besides, it has also applied for a new license for an area in the Brahmaputra riverbed that covers certain portions of its expired PELs.
Futhermore, OIL requires certain licenses under the Forest Conservation Act, 1980 to carry out seismic surveys in areas such as Abhoypur Reserve Forest and the Tarani Reserve Forest. The approvals for these and some projects that are in pipeline have not yet been granted, the offer document said.
OIL, which produces 3.5 million tonnes of oil annually, will tomorrow hit the capital market with an Initial Public Offer (IPO) that closes September 10.
The explorer seeks to rise around Rs 4,500 crore through the issue and plans to utilise the funds for capital expenditure over the next two years.
The Mini-Ratna will offload 11 per cent stake to the public, while the government will divest 10 per cent of its stake in the company to state refiners.