L N Mittal opts out of Kazakh oilfield JV with ONGC

Steel magnate Lakshmi Mittal has pulled out of a project to develop an oil field in Kazakhstan in partnership with Oil and Natural Gas Corp (ONGC) and is looking for buyers for its stake in another company in the Central Asian nation.

Mittal Investment Sarl, the holding company of Mittal family, had used the Kazakh government to muscle its way into the Satpayev oilfield in the Caspian Sea where ONGC Videsh (OVL) was shortlisted for a stake. However, just on the eve of signing an agreement for the field, MI decided to pullout, sources in know of the development said.

OVL which had in 2007 relented to the Kazakh condition of getting Mittal in the highly prospective field, has written to Almaty, saying the 25 per cent stake in Satpayev would now be acquired by it and not by ONGC-Mittal Energy  - the joint venture it had with Mittal.

Sources said Mittal, which had dumped OVL when in April 2007 it acquired 50 per cent stake in Caspian Investments Resources (CIR) from Russian oil firm LUKoil for $980 million, is now looking at selling its interest in the firm.

CIR acquisition was originally to be done by OMEL but the India-born billionaire went ahead on his own citing opposition to OMEL from Lukoil.

Mittal now wants to exit from all of the oil and gas projects in Kazakhstan.

While ONGC Chairman R S Sharma declined comments, MI did not immediately offer any comments.

Sources said Mittal offered the stake in CIR to OVL, which declined it, apparently because it thought the company was a sinking ship with oil production falling and actual reserves not matching the announced ones.

Mittal is now looking for buyers including those in China for its stake in CIR. LUKoil, which holds the remaining stake in CIR, may be a potential buyer.

Sources said OVL had anticipated that Mittal may not continue with Satpayev and so, a few months back, had sought specific permission from the Cabinet for going ahead with investing the entire $400 million in the field on its own.

The board of OVL, the overseas arm of ONGC, met on November 17 and decided to write to the Kazakh government on Satpayev. Kazakh national oil firm KazMunaiGas will be the operator of the field, holding remaining 75 per cent stake. An Exploration and Production Contract would be signed soon.

The Satpayev block, situated in the Pre-Caspian Basin of Kazakhstan in Caspian Sea, covers an area of 1,582 sq.Km.

OMEL, now OVL, is to pay $26 million as signing amount to the Kazakhstan government for 25 per cent stake in Satpayev field. Besides, it would also pay $80 million as one-time assignment fee. Over and above these, it has committed a minimum exploration investment of $165 million and an additional optional exploration expenditure of $235 million.