OVL, IOC consortium to buy Russian oil fields for $4.2 billion

ONGC Videsh Ltd (OVL) and a consortium led by Indian Oil Corp today signed agreements to buy stake in two Russian oilfields in Siberia for an estimated USD 4.2 billion (over Rs 28,253 crore).
IOC, Oil India Ltd and a unit of Bharat Petroleum Corp Ltd (BPCL) signed sale purchase agreement (SPA) for 29.9 per cent stake in Tass-Yuriakh oilfield from Russia's Rosneft for USD 1.28 billion, top officials said.
The consortium also signed Heads of Agreement (HoA) with Rosneft for taking 23.9 per cent stake in Vankor oilfield for just over USD 2 billion.
Simultaneously, OVL, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), which had in September last year bought 15 per cent in the Vankor for USD 1.26 billion, signed a MoU envisaging its stake going up in the Siberian oilfield to 26 per cent by paying an additional USD 925 million.

The IOC-led consortium also signed another MoU with Rosneft for exploring taking stake in development of Vankor cluster fields of Suzunskoye, Tagulskoye and Lodochnoye.
The agreements were signed on the second day of Rosneft CEO Igor Sechin's two-day visit to India.

Speaking to reporters after the signing of the agreement, he said the pacts "allow India partners to participate in Rusian upstream sector, whilst opening the growing India market to Rosneft".
While the IOC-OIL-Bharat PetroResources deal for 29.9 per cent stake in Tass-Yuriakh oilfield is a concluded agreement, the consortium's Vankor deal is an initial pact and a sale purchase agreement is yet to be concluded. Similarly, OVL's increase in stake in Vankor too is yet to be concluded.

Taas-Yuriah oilfield, which holds recoverable reserves of 137 million tons, currently produces 20,000 barrels of oil per day. The output is slated to rise to 100,000 bpd in two year, officials said, adding that IOC-OIL-Bharat PetroResources will pay another USD 180 million as its share of future capex.
Rosneft had last year sold 20 per cent stake in Taas-Yuriah BP of UK for USD 750 million. The Russian firm will hold 50.1 per cent stake in the project after the deal.
The Russian firm will hold the remaining 50.1 per cent in Vankor after OVL and the IOC-led consortium complete buying the total of 49.9 per cent.

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Rosneft, Russia's biggest oil producer, has been impeded by US and European economic sanctions over Moscow's involvement in conflict in Ukraine. It needs to pay off debts incurred in its USD 55 billion acquisition of TNK-BP in 2013 and investments by India will help its cause.
BPCL in a regulatory filing said its 100 per cent subisidary Bharat PetroResources Ltd (BPRL) along with Oil India Ltd (OIL) and Indian Oil Corp (IOCL), acting jointly as the Indian Consortium, have signed definitive agreement to acquire 29.9 per cent.
The consortium acquired the stake of "the charter capital of LLC 'TYNGD', a company organised under the laws of Russian Federation, from LLC RN Razvedka I Dobycha, a wholly-owned subsidiary of Rosneft Oil Company, a national oil company of Russia", it said.

The acquisition is subject to Board, Government and regulatory approvals and is expected to close by September.
Vanko is Russia's second largest field by production and accounts for around 4 per cent of the country's output. It produces oil at a peak level of about 440,000 barrel a day.
Rosneft said the Heads of Agreement with OIL-IOC-BPRL for Vankor envisages the possible execution of legally binding documents with regard to the sale and purchase transaction.
The MoU with OVL "also oversees the analysis of the joint trading development's potential, including the possibility of entering into long-term crude-oil supply contracts," it said.

Sechin said: "The signed documents literally mark the turning of a new leaf in the cooperation between Russia and India in the energy sector, reached in continuation of the agreements, achieved at the highest level between the President of the Russian Federation Vladimir Putin and the Prime Minster of India Narendra Modi."
"The reached agreements represent a shift from energy dependency to energy partnership of both countries."
The official said that originally OVL was negotiating to buy 25 per cent stake in Vankorneft, the developer of the Vankor oil and gas condensate field in Turukhansky district of Krasnoyak Territory in Russia.

Rosneft was however willing to give no more than 10 per cent. A 10 per cent stake would not have given OVL a position on board of Vankorneft and so, the Indian firm pressed hard and got a higher 15 per cent interest with right to nominate two board members.
Rosneft, Russia's national oil company, held 100 per cent stake in Vankorneft. Acquisition by OVL is subject to relevant board, government and regulatory approvals and is expected to be completed by mid-2016, he said.
The 15 per cent stake buy in Vankor was the 4th-biggest acquisition by OVL. In 2013, it had paid USD 4.12 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-focussed Imperial Energy for USD 2.1 billion. Prior to that, it had in 2001 paid USD 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 output. It produces around 4,42,000 barrels of crude oil per day.