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23 April 2024

India's energy giants in global hunt for deals

By Salil Panchal

Cash-rich Indian energy groups are looking to flex their new-found muscles with global acquisitions as the fast-growing country joins China in the hunt for vital resources, analysts say.

"India's oil and gas sector will be a force to reckon with this year for cross-border deals," said Sidharth Punshi, India head of global investment bank Jefferies.

Reliance Industries, controlled by India's richest man Mukesh Ambani, has generated $2 billion (Dh7.34bn) via stock sales since September and is expected to keep raising cash to boost its reserves and fund eventual acquisitions.

The company, India's largest by market capitalisation, already has Netherlands-based chemicals group LyondellBasell in its sights.

But Lyondell, which does most of its business in the United States, has so far resisted a takeover offer from Reliance worth an initial $12bn.

"There is no doubt Reliance is looking to acquisitions [beyond Lyondell]," said energy analyst Deepak Pareek at Mumbai's Angel Broking.

A deal between Reliance and Lyondell, the world's third-largest chemicals maker, would create a global energy and chemicals giant, with annual revenues estimated at near $80bn.

Reliance had no comment to make on its future takeover strategy when contacted. But Pareek said the speed with which Reliance has raised money has raised eyebrows.

"Several local key projects have been completed, so Reliance can focus on acquisitions," he added.

For Reliance, an overseas acquisition would diversify its assets – it is almost entirely focused on India at present – and would launch it as a global competitor to established European, US or Chinese rivals.

"There are oil companies in the UK, Canada and Central Asian Republics with proven reserves, which could be attractive buy-out targets for Indian firms," said Bundeep Singh Rangar, Chairman of advisory firm IndusView.

"The idea is to expand overseas and be one step ahead of global oil firms who are keen to enter India," he said.

Indian companies would be following the lead of Chinese energy giants such as Cnooc and Sinopec, which have been on a buying spree in Africa and Central Asia.

India, which imports at least 70 per cent of its oil needs, has like China been racing to find new energy sources to fuel its rapidly developing economy.

Reliance's rivals, state-run exploration firm Oil and Natural Gas Corp, Cairn India and Essar Oil, are also on the lookout for acquisitions.

Essar Oil is in talks to buy out three Shell refineries – one in Britain and two in Germany – in exchange for a 10 per cent stake in the British group.

Cairn India has meanwhile begun pumping crude from a vast oilfield in the desert state of Rajasthan, which will eventually increase India's crude output by 20 per cent. (AFP)


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