OVL may buy 35% more stake in Russian Vankor oil field for $3 bn

ONGC Videsh along with Indian Oil Corporation (IOC), Oil India and Bharat Petroleum is in talks to buy about 35 per cent additional stake in Russia’s Vankor oil field in Siberia for close to $3 billion. OVL, the overseas arm of the state-owned Oil and Natural Gas Corp (ONGC), had on September 4 last year agreed to buy 15 per cent stake in Russia’s second-biggest oil field of Vankor from Rosneft for $1.26 billion.

While the 15 per cent deal is yet to be concluded, Rosneft is now agreeable to selling a total of 49.9 per cent in Vankor to Indian firms, an official said. Of the 49.9 per cent stake offered, OVL will take 26 per cent (including 15 per cent agreed in September last year) and the rest 23.9 per cent will be split equally between IOC, OIL and Bharat PetroResources Ltd (BPRL), a unit of BPCL.

An MoU for this may be signed when Rosneft boss Igor Sechin will visit India next week, he said, adding that the additional 34.9 per cent stake may come for $2.9 billion. A separate pact to formalise the December MoU for IOC, OIL and BRPL buying a 29 per cent stake in the Taas-Yuriakh oil field in East Siberia may also be inked during the visit. The stake in Taas-Yuriakh, which is expected to produce 5 million tonnes of oil annually, may cost around $1 billion, going by Rosneft’s deal last year to sell 20 per cent stake in it to BP for $750 million.

The official said originally OVL was negotiating to buy 25 per cent stake in Vankorneft, the developer of the Vankor oil and gas condensate field in Turukhansky district of Krasnoyak Territory in Russia. But Rosneft was willing to give no more than 10 per cent. A 10 per cent stake would not have given OVL a position on board of Vankorneft and so, the Indian firm pressed hard and got a higher 15 per cent interest with right to nominate two board members.

Vankor has recoverable reserves of 2.5 billion barrels. The 15 per cent stake guarantees OVL 3.3 million tonnes a year of oil. Rosneft, Russia’s national oil company, held 100 per cent stake in Vankorneft. Acquisition by OVL is subject to relevant board, government and regulatory approvals and is expected to be completed by mid-2016, he said. 

The 15 per cent stake buy in Vankor was the fourth-biggest acquisition by OVL. In 2013, it had paid $4.12 billion for a 16 per cent stake in Mozambique’s offshore Rovuma Area 1, which holds as much as 75 trillion cubic feet of gas reserves.

In 2009, it had bought Russia-focussed Imperial Energy for $2.1 billion. Prior to that, it had in 2001 paid $1.7 billion for a 20 per cent interest in the Sakhalin-1 oil and gas field off Russia’s far eastern coast.

Vankor is Rosneft’s (and Russia’s) second-largest field by production and accounts for 4 per cent of Russian output. It produces around 4,42,000 barrels of crude oil per day.