ONGC Videsh is the exploration arm of Oil and Natural Gas Corporation. For the present, ONGC plans to work on the block alone though both IOC and Gail are keen on teaming up for the venture. "There is enormous potential here and India will also benefit in its relations with Iraq through ONGC Videsh's efforts," sources said.

ONGC Videsh has also teamed up with Reliance Petroleum to work on a discovered field in Iraq, Tuba, which can yield up to 400 million barrels of oil. Though details on the equity-sharing arrangement are not known, sources say the two will hold 50 per cent each. Reliance Petroleum is believed to be keen on expanding its presence in Iraq forexploration activities, though no official confirmation from the company could be sought.

Experts believe that Iraq would be a strategic move for ONGC Videsh as long-term arrangements of sourcing crude cannot be ruled out. This would make enormous sense what with refining capacity in the country likely to increase substantially with the entry of private players like Reliance Petroleum and Essar Oil.

Public-sector units are also planning their own projects and the Ninth Plan has earmarked substantial investments proposed by IOC, Bharat Petroleum and Hindustan Petroleum Corporation. The demand for crude would be enormous and it would be to the advantage of ONGC to have a supply pattern in place.

As for the Abhokima block, sources say IOC stands a better chance than Gail as it has already entered into a memorandum of understanding (MoU) with ONGC Videsh for E&P activities. In fact, the two are also tipped to team up for work in Azerbaijan and Kahzakhstan as also on some discovered fields in India.

At onepoint, ONGC Videsh was equally keen on roping in HPCL and BPCL for exploration activities abroad. HPCL has, however, kicked off its own E&P company, while BPCL has no intentions of entering the upstream sector for the time being.

The latest annual report of the ministry of petroleum and natural gas states that ONGC Videsh has entered into an MoU with Track International of the US for assistance in acquiring oil/gas producing properties within certain defined areas to augment the country's oil production.

The R-Group report on restructuring the domestic oil sector had stressed the importance of acquiring acreage abroad for finding oil and gas. "India possesses the competence, manpower and service industry to explore, develop and access the reserves of oil and gas in international basins," the report stated.

According to the committee which prepared the study, international opportunities for equity oil are available only for a very short while - not more than two months. The procedures today do not allowsuch opportunities to be seized. To promote acquiring equity oil, the R-group suggested setting up of an empowered committee, chaired by the petroleum secretary and with representations from government departments such as the ministries of external affairs, finance and commerce.

The R-group was of the view that further incentives like tax relief/exemption were also required for E&P activities abroad. To enable domestic companies raise the capital required in foreign currency, domestic oil and gas production should be treated as deemed export so that a part of the revenue can be considered to have been earned in foreign exchange.