Mittal sells his stake in Kazakh oil co to Sinopec

Steel tycoon Lakshmi N Mittal is believed to have sold his stake in a Kazakhstan oil company to China’s Sinopec after ONGC Videsh Ltd turned down the offer.

Mittal Investment Sarl, the holding company of Mittal family interest in world’s largest steel ArcelorMittal, sold its 50 per cent stake in Caspian Investment Resources (CIR), which operates an oil production project in Kazakhstan to China Petroleum and Chemical Corp (Sinopec), industry sources said.

Sources, however, could not say how much Sinopec paid for the stake in CIR, where Russia’s Lukoil Overseas owns the remaining 50 per cent.

An email sent to Mittal Investment (MIS) on the deal did not elicit any immediate response.

Mittal had purchased the 50 per cent stake in 2007 from Lukoil for $980 million. CIR owns a 50 per cent stake in projects to develop four Kazakh fields: Alibekmola and Kozhasai (ownership shared 50-50 with KazMunayGas), North Buzachi (with Chinese CNPC), and Arman (with Shell). The four fields yielded a total of 4.3 million tonnes of oil in 2009.

CIR also has a 25 per cent stake in the project to explore the Zhambai Yuzhny and Yuzhnoye Zaburrunye fields in the northern Caspian. The company’s proved and probable hydrocarbon reserves total 269.6 million barrels.

Sources said Lukoil had earlier declined to exercise its pre-emptive rights to buy the stake. Mittal had then approached ONGC Videsh Ltd, which too turned down the offer.

OVL had sought certain information like the reserves the fields hold, future production profile and prospects, but did not get a response from MIS, they said, adding that OVL stopped pursuing the opportunity after that.

Sources said OVL may have declined Mittal’s offer because it thought the company was a sinking ship with oil production falling and actual reserves not matching the announced ones.

CIR was to be originally acquired by ONGC-Mittal Energy Ltd (OMEL), the equal joint venture of OVL and MIS, but the India-born billionaire went ahead on his own, citing opposition to OMEL from Lukoil. He later delayed transferring the assets to OMEL, citing opposition to such a move by the Kazakhstan government.

LUKoil had in 2005 acquired Canada’s Nelson Resources (later renamed the CIR) for $2 billion.