NEW DELHI Jan 6 India's ONGC Videsh, the overseas investment arm of explorer Oil and Natural Gas Corp , is considering an oil-for-debt deal to help fund the acquisition of a Mozambique gas field, its head of finance S.P. Garg said on Monday.
ONGC Videsh has already raised $1.5 billion through bridge loans to help fund the purchase and will raise another $2.5 billion by March, Garg said.
"We are exploring various options including a term loan, bond issue and advance sale of our crude oil to raise funds. The ultimate decision will depend on the cost of funds," Garg told reporters.
"In the current scenario, ONGC is not generating a surplus, so we have to resort to borrowing," he added.
Parent firm ONGC, India's largest oil and gas exploration company, is forced to provide a hefty discount on oil sales to India's state refiners, which sell fuel at low prices fixed by the government.
In June, ONGC together with Oil India acquired a 10 percent stake in a deepwater gas field in Mozambique's Rovuma basin from Videocon for $2.48 billion.
In August ONGC agreed to buy another 10 percent stake in the field from Anadarko Petroleum for $2.64 billion.
The field has the potential to become one of the world's largest hubs for production of liquefied natural gas (LNG), the companies have said, and has helped boost Mozambique's gas reserves to around 150 trillion cubic feet.
Garg said ONGC Videsh could sign a three-year deal to raise funding in exchange for future oil output from any of its producing assets in Russia, Azerbaijan or Brazil.
ONGC Videsh has stakes of 27 percent in the BC-10 block in Brazil's Campos Basin, 20 percent in Russia's Sakhalin-1 project and 2.7 percent in the Azeri, Chirag and Guneshli group of oilfields in Azerbaijan.
It sells oil from the Brazil field on a term contract basis and sells crude from Sakhalin and Azeri fields through spot tenders.
Due to political problems in Sudan, ONGC Videsh is not planning to rely on its oil output from Sudan to raise debt and has shut its South Sudan fields, Garg said.