HANOI: ONGC Videsh Ltd (OVL), the foreign arm of state-owned petroleum explorer Oil and Natural Gas Corporation (ONGC), on Friday announced it had signed a definitive agreement to acquire up to 15 per cent stake in CSJC Vankorneft, which owns Russia’s second-largest oil and gas field, Vankor, in eastern Siberia. Rosneft, Russia’s national oil company, holds 100 per cent stake in Vankorneft. For years, OVL has been in talks with Rosneft to acquire stake in the field.
“The acquisition is subject to relevant board, government and regulatory approvals and is expected to be closed by mid-2016,” ONGC said in a statement, without disclosing the value of the deal. Citing “people familiar with the plan”, a Bloomberg report said Rosneft would sell the stake in Vankor to OVL for $1.27 billion.
Following the deal, OVL will get two positions on Vankorneft’s board of directors. Rosneft would create an operator company to allow more efficient management of both the Vankor field and the company’s other assets in that region, the Russian company stated.
The transaction will enhance OVL’s presence in Russia. The company already holds 20 per cent stake in the Sakhalin-I oil and gas field in eastern Russia. In 2009, it had acquired the Siberian fields of Imperial Energy for $2.1 billion.
The Vankor field produces about 442,000 barrels per day (bpd) of crude oil, four per cent of Russia’s overall crude oil production. After ONGC acquires stake in the field, its daily production would stand at about 66,000 bpd.
The agreement for the deal was signed by OVL Chief Executive Officer and Managing Director N K Verma and Igor Sechin, chairman of Rosneft’s board of directors at the Eastern Economic Forum, held in Vladivostok on Friday. Russian President Vladimir Putin was also present on the occasion.
“Collaboration in such a large-scale project will allow establishing a brand new level of strategic cooperation between Rosneft and ONGC Videsh. This will accelerate the development of our partnership in other large-scale oil and gas upstream projects in the region,” said Igor Sechin.
He added Rosneft would continue talks to sell more stake in Vankor to other companies, including China National Petroleum Corporation (CNPC). In September last year, Rosneft had sold 10 per cent stake in Vankor to China’s CNPC for $I billion. OVL said Citi was its financial advisor for the deal, while Dentons was the legal advisor.
In October 2014, Rosneft had made a formal offer to OVL to sell stake in the Vankor cluster fields in northern Siberia, with estimated reserves of 500 million tonnes (mt) of oil and 182 billion cubic metres (bcm) of gas. Initially, a deal was expected to be clinched during Putin’s visit to India in December last year. The Russian company had also proposed joint development of another field, Yurubcheno-Tokhomskoye, with OVL.
For Russia, the deal is significant, considering the sanctions imposed on it by the US and the European Union. Russia is the world’s largest producer of oil, with output of about 10 million bpd.
Vankorneft was established in 2004 for development of the Vankor oil and gas condensate field in the Turukhansky district of Krasnoyarsk territory. The initial recoverable reserves of the Vankor field are estimated at 476 million tonnes of oil and condensate and 173 billion cubic metres of gas.
OVL is present in 36 projects across 17 countries, including 13 producing assets in Russia, Syria, Vietnam, Sudan, Myanmar and Azerbaijan. Sitting on total oil and gas reserves of 647 million tonnes of oil equivalent, the company produces 167,000 barrels of oil and oil equivalent gas a day. In the past two years, it has invested about $4 billion in acquisitions.
These include acquisition of Hess Corporation’s 2.72 per cent stake in the Guneshli Fields in Azerbaijan, 12 per cent stake in a deep-water block in Brazil and six per cent in the Rovuma Area-I offshore block in Mozambique from Videocon. It had also acquired 10 per cent stake in the same area from Anadarko in February 2014.
