Indian Oil Corporation (IOC) is likely to hike its takeover offer for Middle East-focused gas exploration and production company Gulfsands Petroleum Plc after the UK-based company today rejected IOC's £400 million (Rs2728 crore) unsolicited takeover offer.

Public sector oil marketing company IOC, India's largest commercial company by revenue, had made an £400 million unsolicited acquisition offer on 18 March for the London-based and AIM-listed independent oil and gas explorer Gulfsands Petroleum.

The board of Gulfsands, without naming the bidding company, today rejected an unsolicited takeover offer, saying that the £400 million offer ''Is wholly inadequate and materially undervalues the company.''

Citing a source close to the deal, The Financial Times, however said today that the mystery bidder was IOC and that the Indian oil major will consider its options over the weekend, and could raise its 350 pence a share offer.

Gulfsands said that it is not currently involved in any process to solicit offers and is confident of its strategy to become a pre-eminent exploration and production company in the Middle East and to continue to demonstrate tangible growth.

IOC, which is being advised by the UK-based financial advisory firm Seymour Pierce, has approached several of Gulfsands' large UK institutional shareholders, including Schroders, a £148.4 billion assets management company that holds 22 per cent stake in Gulfsands, before making its bid.

The board of Gulfsands', which is being advised by Royal Bank of Canada, is understood to be not willing to accept any offer below 400 pence, but may yield to shareholders pressure to enter into talks with IOC, said the paper.

Gulfsands owns a 50 per cent working interest and is operator of Block 26 covering approximately 8,250 square kilometres in North East Syria. This field is producing at an average gross production rate of approximately 17,000 barrels of oil per day. The current exploration license expires in August 2010 and is extendable for a further two years.

Gulfsands signed a Memorandum of Understanding in January 2005 with the Ministry of Oil in Iraq for the Maysan Gas Project in Southern Iraq, and is negotiating details of a definitive contract for this project.

The company owns interests in 44 blocks comprising approximately 138,000 gross acres offshore Texas and Louisiana, which include 30 producing oil and gas fields.

India currently produces 680,000 barrels of oil per day and spends close to $124 billion (Rs600,000 crore) to import 75 per cent of its crude oil requirement.

According to the Paris-based International Energy Agency, India's energy consumption is likely to more than double by 2030 to 833 million tons of oil equivalent, which would make the country's import bill soar to more than $248 billion if taken at an average price of $66 a barrel of crude.

The Indian government has recently given a mandate to the state-owned oil companies to make energy acquisitions overseas in order to meet the country's energy requirement in the future.

But in the past two years, Indian oil companies have repeatedly been out bid by sovereign fund-backed rival China for overseas energy acquisitions, despite India's foreign exchange reserves at a healthy $283.5 billion. ( See: ONGC, OVL pitted against Chinese sovereign funds for foreign acquisitions) 

India is now mulling to set up a $20-billion sovereign fund to aid state-owned oil companies make much needed energy acquisitions overseas. (See: India mulls setting up sovereign wealth fund)