ONGC plans to buy Kazakhstan oil field stake
BY SANTANU CHOUDHURY
NEW DELHI -- ONGC plan to pay as much as $5 billion to ConocoPhillips for a stake in a Kazakhstan oil project could herald more such deals by Indian energy companies seeking to offset declining domestic production in the face of rising energy demand. The purchase, by ONGC Videsh, will likely help India's largest explorer to arrest a steady decline of oil and gas production in recent years.
With Kazakhstan's Kashagan oil field set to begin production in 2013, ONGC Videsh likely paid a premium for the 8.4% stake. Ambit Capital's analyst Dayanand Mittal said more such deals are "definitely" on the horizon, though perhaps not at quite as high a price tag as the Kashagan stake given the premium, "but a number of deals could happen in the billion dollar club." The latest deal is evidence of more nimble government decision making, he added, noting that Indian firms have lost acquisition opportunities previously to overseas rivals, especially from China.
ONGC Videsh agreed to buy a 2.7% stake from Hess in the Azeri, Chirag and Guneshli fields in Azerbaijan as well as a 2.4% interest in the associated BTC pipeline for a total of $1 billion. ONGC Videsh said in a statement that the Kashagan acquisition will give it access to the largest proven oil field in Kazakhstan's North Caspian Sea area provided it gains necessary government and regulatory approvals and crosses other potential hurdles, such as other stake owners exercising priority . The first phase of the project will produce an average of 1 mmtpa over 25 years, with peak annual output of around 1.6 mt, it said.
ConocoPhillips said that it had notified government authorities in Kazakhstan and other consortium members ENI, Exxon Mobil , KazMunaiGas, Shell and Total of its intent to sell.
ONGC accounted for 62% of India's crude oil and 49% of natural gas output in the year ended March 31. The company said earlier this month that it will miss its production forecast for 2012-13 and 2013-14 due to project delays. It has seen its output fall each year for the past five years. Like other Indian oil companies, ONGC has sought to increase domestic production by forging partnerships with foreign energy companies.
ONGC sold a 26% stake of an India east coast block to Inpex as part of efforts to boost production. An executive at the company said it aimed to sell stakes in some of its deep water and ultra-deepwater blocks as well as enter into joint ventures with global oil and gas majors to accelerate exploration and development of its acreages.
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