Oil India to raise upto $900 mn debt to fund Mozambique buy

State-run Oil India today said it will raise up to USD 900 million debt from overseas markets by October to pay for its acquisition of 4 percent interest in a gas field in Mozambique.

"The total cost of our acquisition is around USD 1 billion and we will fund up to 80-90 percent of it through overseas markets," OIL Director (Finance) TK Ananth Kumar told reporters here while announcing the company's annual numbers.

Also Read: Oil India to start exploration in KG block in Aug

The company is already "gearing up" for meeting the formalities around the fund raising - which would be through loans or issue of bonds - as it has to pay Videocon, from whom it is jointly acquiring 10 percent interest in the giant gas field in Rovuma Area 1 offshore block, by September or October, he said.

The 10 percent stake will be split 60:40 between ONGC Videsh (OVL) and OIL India . Oil India would like to leverage on its current debt-free status and also on lower interest rate offerings available overseas, Kumar said.

ONGC Videsh, the dedicated overseas subsidiary of the state-run oil exploration giant ONGC, and Oil India, had last week announced to jointly buy Videocon's 10 percent interest in the gas field for USD 2.48 billion. The field covers about 2.6 million acres of deepwaters in the Rovuma Basin, with an estimated recoverable resources of between 35 and 65 trillion cubic feet.

Apart from raising money to fund its acquisition, the company has also applied to raise USD 250 million through the external commercial borrowing route for its ongoing domestic capital expenditure plans, which stands at Rs 3,581 crore for FY14, Chairman and Managing Director SK Srivastava said. Just like its larger peer ONGC , Oil India has decided to form a dedicated unit for overseas operations, he said.

The company will have to pump USD 1.66 billion over the next five years, or USD 400 million a year, towards the development of the gas field and building of an LNG plant there, Srivastava said, adding, production from the facility will start from 2018.

Being a state-run firm, Oil India is always in talks for acquiring more interests to secure the country's energy requirements, he said, adding, it is currently scouting for two blocks in Africa. He declined to offer details about them. Srivastava welcomed the Cabinet decision to hike natural gas price, saying it will have the desired impact of increasing investments in oil and gas exploration. He said the move will boost Oil India's bottom line by Rs 1,000 crore per annum.