ONGC is close to acquiring equity stakes in oil sand projects in Canada for

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up to $4 billion (Rs 17,776 crore).

“We are looking for these type of opportunities (investing in oil sands). Canada has huge reserves of oil sands,” ONGC group chairman and managing director AK Hazarika told Financial Chronicle on Wednesday.

Hazarika said investment in oil sands exploration would be huge: “It will be in billions. Volumes are very big. It may go to anything between $2 billion and $4 billion.” Oil sands are unconventional hydrocarbon deposits. It is a mixture of sand, clay, water and dense form of petroleum. Canada and Venezuela have large deposits of oil sands.

Hazarika did not divulge the names of companies with whom ONGC is engaged in advanced talks. Only a few global companies such as Total, Royal Dutch Shell, Devon Energy, Husky Energy and Suncor Energy, among others, have invested in oil sand projects in Canada. ONGC has cash reserves of about Rs 14,000 crore, the PSU’s director (finance), DK Sarraf, told FC. “If we get a good opportunity, we can spend in multiples of our cash reserve. We do not have any borrowings,” he added.

Canada started exploiting oil sands in 1999. Reports suggest that crude oil output from oil sands in Canada is expected to touch 2.7 million barrels per day (mbpd) by 2015 from 1 mbpd in 2004.

“Exploitation of oil sands becomes economically viable if global crude oil price remains above $80 a barrel. Since crude oil price is hovering above $120 a barrel and if it stays at these levels, crude oil extracted from oil sands will generate additional revenue for companies,” said Kalpana Jain, senior director at international consulting firm Deloitte Touche Tohmatsu India.

ONGC has already invested in an oil sand project in Carabobo in Venezuela and expects to drill oil from the acreage by 2014-15, Hazarika said.

Last year, the government allowed ONGC Videsh, the overseas subsidiary of the government-run firm, to spend $1.33 billion on exploration of hydrocarbon resources in Carabobo-1 project. Its partners Indian Oil Corporation and Oil India would also invest $424 million in the project.

ONGC shares surged 4.78 per cent on Wednesday to close at Rs 309.35 on the Bombay Stock Exchange. The explorer’s shares have gained nearly 19 per cent in the past 12 months against Sensex’s 7.8 per cent gain.