OVL steps up Vankor oil field play, to buy 35% additional stake

ONGC Videsh Ltd (OVL), along with Indian Oil Corporation (IOC), Oil India (OIL) and Bharat Petroleum Corporation Limited (BPCL), is in talks to buy about 35% additional stake in Russia's Vankor oil field in Siberia for close to $3 billion.

OVL, the overseas arm of the state-owned Oil and Natural Gas Corp (ONGC), had on September 4 last year agreed to buy 15% stake in Russia's second-biggest oil field of Vankor from Rosneft for $1.26 billion.

While the 15% deal is yet to be concluded, Rosneft is now agreeable to selling a total of 49.9% in Vankor to Indian firms, an official said.

Of the 49.9% stake offered, OVL will take 26% (including 15% agreed in September last year) and the rest 23.9% will be split equally between IOC, OIL and Bharat PetroResources Ltd (BPRL), a unit of BPCL.

An MoU for this may be signed when Rosneft boss Igor Sechin will visit India next week, he said, adding that the additional 34.9% stake may come for $2.9 billion.

A separate pact to formalise the December MoU for IOC, OIL and BRPL buying a 29% stake in the Taas-Yuriakh oil field in East Siberia may also be inked during the visit.

The stake in Taas-Yuriakh, which is expected to produce 5 million tonnes of oil annually, may cost around $1 billion, going by Rosneft's deal last year to sell 20% stake in it to British Petroleum for $750 million.

The official said originally OVL was negotiating to buy 25% stake in Vankorneft, the developer of the Vankor oil and gas condensate field in Turukhansky district of Krasnoyak Territory in Russia.

But Rosneft was willing to give no more than 10%. A 10% stake would not have given OVL a position on board of Vankorneft and so, the Indian firm pressed hard and got a higher 15% interest with right to nominate two board members.

Vankor has recoverable reserves of 2.5 billion barrels. The 15% stake guarantees OVL 3.3 million tonnes a year of oil.

Rosneft, Russia's national oil company, held 100% 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% stake buy in Vankor was the fourth-biggest acquisition by OVL. In 2013, it had paid $4.12 billion for a 16% 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 $2.1 billion. Prior to that, it had in 2001 paid $1.7 billion for a 20% 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% of Russian output. It produces around 4,42,000 barrels of crude oil per day.