Mittal, which made rapid advances in oil sphere this year first with a 49 per cent stake in HPCL's Bhatinda refinery and then partnering the state-run firm for a separate refinery on the east coast, is in talks with financial institutions to buy out their 50 per cent stake in Prize Petroleum, sources close to the development said.
The steel baron is looking for a medium-sized firm, mostly entrenched in E&P. "He has had looked at a few firms but nothing is finalised just now," they said.
Besides Mittal, Essar Oil, Jaiprakash Associates and L&T are other firms interested in buying a 50 per cent stake in Prize Petroleum. HPCL holds the balance 50 per cent in Prize.
Prize operates Cluster-7 field of Oil and Natural Gas Corp (ONGC) and won two exploration blocks in fourth and sixth round of auction under New Exploration Licensing Policy (NELP). The company plans to produce about 50,000 barrels of oil per day from Cluster-7 fields and believes its NELP-VI block in Madhya Pradesh holds three trillion cubic feet of gas reserves.
ONGC had found gas in a well drilled on SR-ONN-2004/1 block in the Satpura-south Rewa basin, but could not test the discovery. The block was then offered for bidding in NELP-VI and was won Prize in association with Jaiprakash Associates.
Prize is the operator of the block with 10 per cent stake, while Jaiprakash has the remaining 90 per cent. Prize has 15 per cent in NELP-VI onland block CB-ONN-2002/3 in the Cambay basin where other partners are GSPC (55 per cent), Jubilant Enpro (20 per cent) and GeoGlobal (10 per cent).
For Cluster 7, which is estimated to hold recoverable reserves of 180 million barrels, Prize roped in Malaysian company M3nergy for pumping oil from the field that ONGC considered 'marginal'.
ONGC will get 45 per cent share of oil from the fields as royalty and will pay Prize Petroleum $35 per barrel for the remaining 55 per cent. The entire $450 million cost of development will be borne by Prize.
After becoming the world's largest steel producer by acquiring Arcelor, the India-born billionaire is setting up his own oil division and wants to grow in the sector through inorganic growth - the way he has grown to become a steel baron.
Mittal, who got into oil business through a joint venture with state explorer ONGC is on a lookout for a medium-sized oil company, the sources said.
"Mittal partnered ONGC because he had absolutely no experience in oil and gas business. His aim even in 2005, when two joint venture companies with ONGC were formed, was to gain experience and ultimately set up an oil division of his own.
Now that the ventures with ONGC have not grown at the pace he wanted, Mittal is on an acquisition lookout," he said.