Soco deal was â€کbad opportunity' for IOC and Oil India

Vol 10, PW 19 (25 Jan 07) People & Policy

Less fortunate for Oil India and IOC was an attempt to acquire UK-listed Soco International and its upstream petroleum business late last year.

PETROWATCH learns Oil India and IOC held their last round of talks with Soco in London sometime in November before talks broke down over the asking price. “We have completely given up this proposal,â€‌ a source tells us.

Moves to acquire Soco were taken up in pursuit of IOC’s unfulfilled dream to own an exploration company with producing assets. Oil India went along for the ride, obediently following oil ministry directions that both should look jointly at overseas opportunities, as far as possible.

Oil India and IOC were offered the Soco opportunity sometime in May or June 2006 by a broker who wanted 10% of the deal as his fee. Some within the Indian consortium agreed, others did not.

After much haggling, the broker’s fee was halved to 5%. But the deal came unstuck for other reasons.

“When we were in the thick of negotiations, the oil price was around $76 a barrel,â€‌ says a source. “Soco wanted a five pound sterling premium to its share price.

â€‌ Again, some in the Indian side agreed, others did not, arguing strongly that the price and the premium were excessive. “Soco has assets in Vietnam, Yemen, Thailand, Congo and a vague interest in some Venezuelan acreage,â€‌ says a source.

“But actual production is only a small quantity from Yemen and Venezuela. We were looking at future potential but that was not justified by the premium.

â€‌ Oil India and IOC appointed Gaffney Cline & Associates to carry out due diligence of Soco. “The GCA report came in when we were in the thick of discussions,â€‌ we are told, “and GCA clearly recommended we drop this opportunity because it didn’t think the assets were worth it.