ONGC to raise $20 billion for global buys

Written by Anupama Airy | New Delhi, Dec 26 | Updated: Dec 27 2007, 05:27am hrs
State-run ONGC will develop a war chest of $20 billion to acquire stakes in major oil and gas properties abroad. Chairman & managing director RS Sharma told FE the company would shortly announce some deals. Sharma said he expected to finalise agreements in Turkmenistan, Iran, Latin America and West Africa.

ONGC has the appetite and the ability to fund its acquisition plans. I would like to fund such acquisitions by way of borrowed funds. However, if I have my own funds, I would first like to use them instead of borrowing from the market. Today, ONGC has cash surpluses of around $4 billion, the CMD said.

Since ONGC is a zero-debt company with a net worth of $16 billion, On a debt-equity ratio of 0.5:1, we can immediately raise $10 billion. Then we have $4-5 billion with us as cash surplus. We also have bonds and stakes in sister PSUs. Therefore, funds are not a problem for ONGC, Sharma added. According to him ONGC could, therefore, raise $20 billion within a six-month period.

Of this corpus, Sharma said overseas arm ONGC Videsh Ltds investment in Iran would be about $4-5 billion. The company will develop the two discovered oil and gas fields: the South Pars Phase 12 project and the Azadegan oil field.

The companys overseas hunt received a shot in the arm on Wednesday when its joint venture company with steel baron LN Mittal, ONGC-Mittal Energy Ltd. (OMEL), beat Britains Centrica plc to bag an exploration block with estimated gas reserves of 2 trillion cubic ft in the Caribbean islands of Trinidad & Tobago. This is OMELs second largest success after Nigeria where it has acquired two exploration blocks.

In another related development, OVL said it would invest $355 million to take a 40% stake in the San Cristobal oil field in Venezuela. Venezuelan national oil company Petroleos de Venezuela will hold the remaining 60% through a subsidiary.

Mittal had in July 2005 inked a joint venture agreement with ONGC Videsh to acquire oil and gas fields, refinery businesses and liquefied natural gas projects in 27 countries.