Whalesbook
Oil India Eyes Venezuela Investment Amid Production Optimism
Oil India Chairman and Managing Director Ranjit Rath stated the company is open to boosting investment in Venezuela's Carabobo oil field, citing improved production prospects. He also confirmed the company is on track for significant production growth in India and nearing completion of its Numaligarh Refinery expansion.
Venezuela Investment Prospects
Oil India currently holds a 3.5% stake in the Carabobo field through a subsidiary, with an investment exposure of approximately $60 million. Rath indicated that the company will "wait and watch" developments, but increased output from the field now appears more likely. Further investment would be considered to support higher production levels. He clarified that no dividends are currently held up in Venezuela due to sanctions or other issues.
Russian Dividend Flows
Rath also addressed overseas investments, stating that Oil India has largely received dividends from its joint ventures in Russia. He reported receiving 100% of dividends from one Russian asset and about 90% from another. The residual amounts are held in local accounts due to transactional restrictions but can be deployed later for overseas investments. Crucially, he stated there are no sanctions impacting Oil India's operations in Russia, and the company has no plans to divest its Russian assets.
Domestic Production Growth
Domestically, Oil India is significantly increasing its drilling activity. The company has completed over 50 wells this year and is targeting approximately 80 wells, a substantial rise from the 30-35 wells drilled three years ago. This higher drilling intensity is expected to drive production growth. Rath guided for a 2-2.5% increase in output this year, aiming to surpass last year's record of 6.71 million metric tonnes. The company plans to drill around 100 wells next year and has a pipeline of over 200 wells planned for the subsequent three years.
Numaligarh Refinery Expansion Underway
The expansion of the Numaligarh Refinery, with a capacity of 9 million tonnes, has begun its commissioning phase. The crude distillation unit is operational, and full commissioning is expected within six to nine months, followed by a stabilization period. The total capital expenditure for this project, encompassing the refinery, crude pipeline, and polypropylene unit, is estimated at approximately ₹40,000 crore. Rath anticipates 40-50% capacity utilization in FY27, with distillate yield projected to remain above 87%.
Market Outlook
Rath expressed confidence in Oil India's production outlook, supported by increased drilling and exploration activity. He acknowledged geopolitical risks as a factor in decision-making but stated the company is prepared. Oil India's market capitalization stands at approximately ₹68,642.85 crore, though its stock has seen a decline of over 7% in the past year.