OVL buys 15% stake in Russia’s 2nd largest oil field for $1.3 bn
5 Sept 2015 5:21 AM IST
In its fourth biggest acquisition ever, state-owned ONGC will buy a 15 per cent stake in top Russian oil producer Rosneft’s Vankor oil field in Siberia for close to $1.3 billion. ONGC Videsh Ltd (OVL), the overseas investment arm of Oil and Natural Gas Corporation, signed an agreement to buy 15 per cent interest in Vankorneft, the developer of the Vankor oil and gas condensate field — Russia’s <g data-gr-id="69">second biggest</g> — in Turukhansky district of <g data-gr-id="68">Krasnoyak</g> Territory in Russia.
The field, which has recoverable reserves of 2.5 billion barrels, will give OVL 3.3 million tonnes per annum of oil production. ONGC Videsh Ltd in a statement said it “has signed definitive agreements to acquire up to 15 per cent shares in CSJC Vankorneft, a company organised under the law of Russian Federation which is the owner of Vankor Field and North Vankor licence.”
Rosneft, Russia’s national oil company, holds 100 per cent stake in Vankorneft. The acquisition is subject to <g data-gr-id="73">relevant</g> board, government and regulatory approvals and is expected to be completed by 2016-mid, it said. While both ONGC Videsh Ltd and Rosneft did not give <g data-gr-id="72">value</g> of the deal, a source privy to the transaction said ONGC Videsh Ltd will pay around $1.3 billion. “The consideration is somewhere between $1.25 billion and $1.3 billion,” the source said.
This will be the fourth biggest acquisition by ONGC Videsh Ltd. It had in 2013 paid $4.125 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-focused 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 production. The daily production from the field is around 442,000 barrels per day of crude oil on an average with OVL’s share of daily oil production at about 66,000,” ONGC Videsh Ltd said. The agreement to buy stake in Vankor was signed by the Chairman of Rosneft Management Board Igor Sechin and ONGC Videsh Ltd Managing Director Narendra Verma in Vladivostok, in Russia’s <g data-gr-id="65">Far East</g>..
“The present transaction provides an opportunity to ONGC Videsh Ltd to enhance its presence in Russia and is consistent with its stated strategic objective of adding <g data-gr-id="58">high quality</g> international assets to its existing E&P portfolio,” the company said. This acquisition, it said, also has significant strategic importance to India, both in terms of augmentation of country’s energy security as well as enhancing its stature in the global political and economic arenas.
OVL currently has 36 projects in 17 countries from New Zealand to Colombia. <g data-gr-id="50">Output</g> from its fields is 167,000 barrels of oil and oil equivalent gas per day and has total oil and gas reserves of about 647 million tonnes of oil equivalent. Upon completion of the deal, OVL will have two seats in the Board of Directors of Vankorneft, Rosneft said.
Rosneft, whose stake in the project will come down to 85 per cent, <g data-gr-id="54">will however</g> keep full control of the general infrastructure of Vankor cluster, including oil pipeline Vankor-<g data-gr-id="59">Purpe</g>. The Russian firm will also create an operator company that will allow more efficient management of both Vankor field and other company’s licences in this region.
Vankorneft is Russia’s second-largest oil producing development. The Vankor field started production in 2009 and has recoverable reserves estimated at about 500 million tonnes. Vankor pumped about 80.9 million barrels of oil in the first six months of the year.
The field produces more than 60,000 tonnes (442,000 barrels) a day and is one of the main sources of supply for the Eastern Siberia-Pacific Ocean pipeline. “Collaboration within such a large-scale project will allow getting on the brand new level of the strategic cooperation between Rosneft and ONGC. This will give an impulse to <g data-gr-id="52">development</g> of our partnership, probably in the other large-scale oil and gas upstream projects in the region.
Such a short term between reaching the agreements and signing the document testifies the high level of credibility between us and the Indian partners which guarantees efficient joint work,” Sechin said in the press release. Russia’s biggest crude producer will continue talks with other companies on selling more stakes in Vankor, including China National Petroleum Corporation.
Meanwhile, petrol pump dealers in Maharashtra have proposed to go on a <g data-gr-id="55">one day</g> strike on September 7 to press for their demand of relief from Local Body Tax (LBT). All Maharashtra Petrol Dealers’ Association (FAMPEDA) President Uday <g data-gr-id="70">Lodh</g> said that the government differentiates between other traders and fuel retailers. Petrol pump retailers have to pay LBT while other traders have been exempted from it.
Govt mulling consultant for oil CPSEs
The government has floated a proposal for appointment of a consultant for a benchmark study to improve productivity, profitability, operational efficiency and future growth prospects of select midstream and downstream oil and gas sector CPSEs.
The objective of the RFP is to solicit proposals from interested agencies/companies/institutes for conducting a benchmark study in the midstream and downstream oil and gas sector and recommend benchmarks for inclusion in the MoU 2016-17 to improve productivity, profitability, operational efficiency, and future growth prospects of CPSEs in the midstream and downstream oil and gas sector,” the Department of Public Enterprises said. Its scope will include, but not be restricted to, identification of common key performance indicators and benchmarks used by the industry at both national and international levels.
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