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Govt apathy may cost ONGC top Kazakhstan oil field stake

Oil and Natural Gas Corporation's (ONGC) $5-billion deal to acquire US energy giant ConocoPhillips' stake in Kazakhstan's Kashagan oil field is likely to fall through as the Indian government has not taken any initiative to convince the Central Asian nation to approve the transaction.

Now, Kazakhstan is considering exercising its pre-emption rights to buy ConocoPhillips's 8.4 per cent stake in Kashagan, that country's biggest oilfield, before selling it to a Chinese company, said sources.

Industry insiders say that the blame for the impending fall of ONGC's biggest acquisition rests squarely with the Indian government which unlike China, has not engaged with Kazakhstan at the highest levels to push the deal through.

While ONGC had struck its deal to buy out ConocoPhillips 8.4 per cent stake in Kashagan way back in November, the Cabinet has not yet approved the transaction. In January the oil ministry had floated a Cabinet note on the issue but that has not come before the Cabinet till now.

Besides, in the absence of the Cabinet nod, Prime Minister Manmohan Singh has not engaged the president of Central Asia's largest oil producer and the second-largest post-Soviet producer after Russia.

On the other hand, China received Kazakh President Nursultan Nazarbayev with much fanfare last month, immediately after which the Central Asian nation's oil minister Sauat Mynbayev stated that 'there is a possibility' of China buying into Kashagan.

Sources said that Singh intends to write to Nazarbayev on the deal this month but it may be too little too late. They also pointed out that last week when External Affairs Minister Salman Khurshid raised the issue of approval for the deal during a visit to Almaty, he was politely told to look beyond Kashagan as well.

On his visit to Beijing, the Kazakh President met his Chinese counterpart Xi Jinping as well as the head of China National Petroleum Corporation (CNPC) on April 6. Kazakhstan's KazMunaiGaz and CNPC agreed to expand oil pipelines from Kazakhstan to China.

Sources said that the Kazakh government is ready to exercise an option to step in and buy ConocoPhillips' stake in place of ONGC. Partners in the Kashagan fields have been sounded out on bringing one of China's state-run oil firms as a partner.

Kashagan, a Caspian Sea field set to produce 370,000 barrels of oil a day, is to start output by September, eight years later than initially planned and with costs nearing $46 billion, double the early estimates.

According to Kazakh law, the government has the right to buy any oil asset for sale in the country at the price agreed on by the buyer and seller. While ONGC got the approval of the partners for acquisition of the ConocoPhillips stake at the end of January, the Kazakh government has time till July to approve the transaction.

Exxon Mobil of the USA, Anglo-Dutch company Royal Dutch Shell, Eni of Italy, Total of France and KazMunaiGaz each hold 16.8 per cent of Kashagan while Japan's Inpex Corp has 7.56 per cent.
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