Powered by OVL, Indian oil cos mull Rosneft stake buy

Indian oil firms led by ONGC Videsh Ltd are mulling buying a part of the $11 billion stake that Russia is selling in its biggest oil firm Rosneft, Petroleum Minister Dharmendra Pradhan said on Thursday. 

Russia is looking at selling 19.5 per cent of state oil champion Rosneft OJSC, preferably to India and China. “Our companies are looking into the offer. They are mulling if they can take some of that equity. They are looking into it,” he told reporters here.

Rosneft produces more crude oil than Exxon Mobil Corp. Asked who among the Indian state-owned oil firms is leading the talks, Pradhan said, “of course OVL is the company heading the discussions now. Others may join later.” Moscow is looking to cut its budget deficit through a stake sale in Rosneft and the preferred option for it is to a strategic partner rather than a public share offering that would be more susceptible to political instability.

Rosneft, whose current market value is put at about $55 billion, is among the companies sanctioned by the US over Russian involvement in Ukraine.

BP plc of UK had bought near 20 per cent stake in Rosneft in 2013, much before Russia got involved in Ukraine. Pradhan, who earlier this month visited Moscow, said Russia is considering disinvestment in Rosneft and Indian companies will certainly evaluate the opportunity.

Rosneft last month completed sale of 15 per cent stake in Russia’s second biggest oilfield of Vankor to OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), for $1.268 billion. During Pradhan’s visit, it signed agreement to sell another 23.9 per cent in Vankor to a consortium of Oil India Ltd, Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) for another $2 billion. It has signed preliminary agreement to sell another 11 per cent stake in the same field to OVL.

“When all these transactions close, Indian companies will have nearly 50 per cent stake in Vankor,” Pradhan said. Vankor field, located in East Siberia, is Russia’s second largest field by production and accounts for around 4 per cent of Russian production. It currently produces about 422,000 barrels of oil per day.

“The production India will get from the near 50 per cent stake in Vankor is equal of roughly half of ONGC’s current domestic oil production,” he said.  Rosneft is close to buying at least 50 per cent stake in Essar Oil Ltd’s Vadinar refinery in Gujarat. 

The consortium of OIL-IOC-BPCL have also signed sale purchase agreement (SPA) for 29.9 per cent stake in Rosneft’s Tass-Yuriakh oilfield for $1.28 billion. The oilfield, which holds recoverable reserves of 137 million tons, currently produces 20,000 barrels of oil per day. The output is slated to rise to 100,000 bpd in two year.

Rosneft had last year sold 20 per cent stake in Taas-Yuriah BP of UK for $750 million. The Russian firm will hold 50.1 per cent stake in the project after the deal.

It will hold the remaining 50.1 per cent in Vankor after OVL and the IOC-led consortium complete buying the total of 49.9 per cent. Pradhan said India is also looking at possibility of laying a gas pipeline from Russia to import the fuel.

“We are talking to Gazprom for that,” he said. Russian law doesn’t allow export natural gas except from a planned plant to liquefy the fuel in the Far East.