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India’s Vedanta goes ahead with $4.5bn investment plan to double oil production

By Ramla Soni

Tycoon Anil Agarwal to go ahead despite crash in prices and debt concerns

Indias Vedanta goes ahead with 4.5bn investment plan to double oil production

Indian tycoon Anil Agarwal is going ahead with an oil and gas expansion programme, despite a crash in prices and concern about debt levels at his company Vedanta Resources.

Agarwal said he would proceed with a $4.5bn investment plan for Vedanta’s oil exploration arm, Cairn Oil and Gas, aimed at more than doubling production to 450,000 barrels per day in two years.

The spread of coronavirus and a price war between Saudi Arabia and Russia have sent oil prices plunging. Brent crude traded below $25 a barrel last week at its lowest level since 2003.

Agarwal argued that India, the world’s third-largest oil importer, is on a path to energy self-sufficiency. Cairn has tied up with US oilfield service companies including Halliburton and Baker and Hughes to increase capacity, he said.

A self-made billionaire, Agarwal has built the company he founded into a large natural resources group using borrowed money to buy distressed assets from the Indian government and mining companies around the world.

It has assets in a 50.1 per cent stake in India-listed Vedanta Ltd and a 79 per cent holding in KCM, a copper mine and smelter in Zambia, which has been seized by the government.

Vedanta Ltd in turn controls Hindustan Zinc and Cairn India as well as aluminium, zinc and copper assets.

At the end of September, Vedanta’s net debt stood at $9.5bn, or 2.8 times adjusted earnings before interest, tax, depreciation and amortisation in 2019.

The company needs to refinance $1.9bn of debt between now and September 2021 while Volcan, Agarwal’s family trust, has to repay $625m of loans.

FURTHER READING: How the coronavirus and oil-price war have affected the Shell share-price forecast

FURTHER READING: Demand for liquified natural gas expected to double by 2040

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