India's big refiners think global

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Some analysts say the logic of integration and supply security may be a smokescreen for the desire to capitalise on oil prices of near $100 a barrel, especially with growing fears that the "golden era" of booming profit margins may be drawing to a close at the end of this decade.

"Every commodity guy talks of getting into exploration and production, and they may give lots of excuses, but all of them, cutting across the line, are attracted by high energy prices," said Kumar Manish, associate director at consultancy firm KPMG.

RESERVES PRICEY

Atul Chandra, president of Reliance's international oil business, this week signalled the firm would shift from years of strong organic growth to pursue acquisitions of up to $15 billion, but said he was reluctant to pay up for proven reserves.

"Getting discovered properties is extremely difficult, even if you get that, they hardly leave any value for you. We cannot acquire for the sake of acquiring," he said.

These private firms have the luxury of cherry-picking assets while state-owned rivals like Indian Oil Corp and flagship Oil and Natural Gas Corp are under government orders to help fuel Asia's third-largest economy and meet the energy needs of its 1.1 billion people.

Manish says high oil prices have also boosted valuations of smaller exploration firms such as Canada's Nikko Resources, U.K. firm Hardy Oil & Gas or even India's Hindustan Oil Exploration.

"It's a rosy story for many of these guys, and some of the companies do look at market cap as a driver," he said.

DOWNSTREAM

Few doubt that Reliance and Essar have the willpower or funds to branch out, extending a long tradition of Indian conglomerates successfully moving into new sectors.

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