ONGC Videsh's agreement firmed for 25% stake in Kazakh oilfield

ONGC Videsh Ltd (OVL) will sign a formal agreement for taking a 25 per cent stake in Kazakhstan’s Satpayev oilfield by the end of February 2011. It is to invest about $400 million (Rs 1,800 crore) in the 1,582 sq km North Caspian Sea oilfield

“India is a very important partner for Kazakhstan. Though there were some issues, the agreement (exploration and production) contract will be signed by end of February,” said that country’s oil and gas minister, Sauat Mynbayev.

He was speaking to reporters after the eighth meeting of the India-Kazakhstan Inter-Governmental Commission (IGC) on Trade, Economic, Scientific, Technological, Industrial and Cultural Cooperation.

India’s petroleum secretary said details of the agreement were in the final stages of discussion. OVL, the foreign arm of state-run Oil and Natural Gas Corporation, signed a memorandum of understanding for the block in 2005, along with the LN Mittal group. The Mittals pulled out last year.

Satpayev has 256 million tonnes (1.75 billion barrels) of recoverable reserves and a peak output of 287,000 barrels per day (14.3 mt a year) is envisaged. KazMunaiGas, the Kazakh national oil company, is to be operator of the field, holding 75 per cent stake.

“OVL will have the option of taking an additional 10 per cent stake in the block on commercial rates when a discovery is made,” said a senior OVL executive.

The initial agreement for OVL and its partner, Mittal Investment Sarl (the holding firm of steel magnate Lakshmi Mittal), getting 25 per cent stake in Satpayev was signed during Kazakhstan President Nursultan Nazarbayev’s state visit in January 2009.

In November 2009, Mittal pulled out of the project and OVL decided to take the entire 25 per cent stake on its own.

A top official said OVL would pay $26 million as signing amount to the Kazakhstan government. Besides, it will also pay $80 million as one-time assignment fee. On top of this, OVL has committed a minimum exploration investment of $165 million and an additional optional expenditure of $235 million.

Murli Deora, minister of petroleum and natural gas, led the Indian talks during the eighth meeting of the IGC. The Kazakh side was led by Mynbayev.

Both sides agreed to expand trade through the Joint Working Group on Trade and Economic Cooperation and the India-Kazakh Joint Business Council.