 "ONGC")
The Union Cabinet chaired by Prime Minister Narendra Modi on Tuesday gave its approval for converting the Rs 5,000-crore loan extended by state-owned Oil and Natural Gas Corporation (ONGC) to its overseas investment arm ONGC Videsh Ltd (OVL) into equity. The approval for the investment by ONGC is aimed at strengthening the capital base of ONGC Videsh. "It will enhance the ability of ONGC to undertake overseas exploration and production business, thereby improving the energy security of the country," the government said in an official release. The Rs 5,000-crore loan was given by ONGC to help OVL acquire a stake in a Mozambique gas field. With an improved debt-to-equity ratio, OVL would be able to independently raise funds on the strength of its balance sheet, rather than relying on ONGC's financial status.
ONGC had carried out a similar loan-to-equity conversion for OVL in 2013, which has so far invested $23 billion on its exploration and production assets in 17 countries. The latest approval could also help the government list OVL on the bourses. The oil ministry had recently asked ONGC to consider listing of OVL, but the company said it would favour delaying such a move given low oil prices.
Earlier this month, the Cabinet had approved OVL's purchase of 15 per cent stake in Russia's Vankor oilfield for $1.26 billion - the first oil deal since the Modi-led government came to power.
OVL got four million tonnes of oil and oil equivalent gas for the stake in Vankorneft, the developer of the Vankor oil & gas condensate field in Krasnoyarsk territory in Russia.
