Indian Oil Corporation Ltd is eyeing a mid-sized oil exploration and production company for strategic acquisition at a cost of $2 billion, according to IOC chairman M S Ramachandran.

Ramachandran was speaking to reporters on the sidelines of an IOC function, held here to announce its star distributors for its petroleum products in Karnataka.

Stating that the proposed acquisition was part of the company's plans to foray into upstream projects for forward integration of its operations, Ramachandran said, "We have approached the government for approval to acquire a mid-sized E&P unit either within the country or overseas after the board had cleared the proposal recently. We have a war chest of $2 billion for such an acquisition."

Declining to specify the E&P unit's name or its geographical location, he added, "The buyout will enable us gain expertise in upstream projects and compliment our backward integration."

In order to expand its refining capacities, IOC plans to set up a refinery in Nigeria, in the state of Edo, on the invitation from the African country for joint collaboration. "We will be signing an MoU with the Nigerian government soon for the refinery by sourcing their crude. Though Nigeria has plenty of crude oil reserves, there is not enough refinery capacity to process them," Ramachandran said.

The Nigerian deal will be finalised after the company evaluates the exploration sites in the Nigerian state. This evaluation will enable IOC to pick up equity stake in an oil field closer to the proposed refinery site.

In partnership with ONGC and GAIL, IOC plans to import 5 million tonnes of liquified natural gas from Iran in exchange for 20 per cent stake in an exploration block at Khus Hussainyeh at Farsi in the Persian country.

"We have also been offered about 30 per cent stake in the olefin project (number 12) at Bandar Azelay in Iran. We are evaluating the offer," he affirmed.