Indian companies try to hook UK oil minnow

Gulfsands Petroleum attracts takeover interest from Indian companies as the country seeks overseas assets for its energy needs.

Gulfsands Petroleum, a UK oil minnow active in Syria, has rejected a takeover offer from two state-owned Indian oil companies - but that may not be game over. Gulfsands, which owns 50 per cent of a block producing 11,000 barrels per day of sticky Syrian crude, said the unsolicited £400 million (Dh2.21 billion) bid from Oil India and Indian Oil Corporation was "wholly inadequate." However, that looks like a negotiating ploy.

Indiatimes quoted an unidentified source as saying the Indian companies planned consultations over a further course of action. And Schroders, a Gulfsands shareholder, said it was keen for Gulfsands's management to enter talks with the bidders. India's government is seeking overseas oil and gas assets to help assure adequate energy supplies for an economy that is expected to grow 8 per cent in the coming fiscal year. It has ordered the state-owned Oil and Natural Gas Corporation and Oil India to acquire at least one big asset per year.

Gulfsands, however, is not a huge catch. Its Syrian oil reserves amount to only 35 million barrels, and it has another 5 million barrels of reserves in the US Gulf of Mexico. So why all the fuss? Gulfsands's hidden ace may be its preliminary gas services deal in Iraq. The company says it is finalising a "definitive" engineering, procurement, construction and operation contract with Baghdad to gather and process gas that is being burnt as a waste product of oil production from the Maysan oilfields south-east of the Iraqi capital.

Gulfsands would also build a gas-fired power plant to supply electricity to the local grid. Advancing Gulfsands's prospects of sealing the gas contract, a Chinese consortium of China National Offshore Oil Corporation and Sinochem this month accepted Baghdad's stiff contract terms for boosting crude output from the Maysan fields, which have combined oil reserves of about 2.5 billion barrels. For India, a foot in the door in Iraq - an oil giant that could one day challenge Saudi Arabia's supremacy as the biggest Gulf exporter - would be a far richer prize than all of the oil in Syria.

On Friday, Gulfsands' stock closed in London at 318 pence, up 1.76 per cent, after hitting a 52-week high of 319.75 pence earlier in the day. [e-mail]