Opening up Russian find could cost ONGC $800m

Written by Economy Bureau | Kolkata, Aug 30 | Updated: Aug 31 2008, 08:41am hrs
Oil & Natural Gas Corporation will have to invest $800 million in the Russian blocks that it may get if the bid by its wholly-owned subsidiary ONGC Videsh Ltd for UK based Imperial Energy is cleared.

RS Sharma, chairman and managing director, said ONGC will have to invest $800 million after the $2.8 billion (Rs 12,000 crore) takeover of Imperial, as the resource base of the Russian assets is very large and lying virgin.

ONGC acquired Imperial earlier this week, and shareholders of Imperial, which is listed on the London Stock Exchange, will have to clear the deal.

"We have crossed the first stage of the bid successfully. Forty five days is the time, we have to keep watch before we can make the final acquisition," Sharma said.

Imperial's board had recommended OVL's 1,250 pence a share bid to its shareholders but OVL also has to get the approval of the Russian authorities.

ONGC may have to take a Russian partner, Sharma indicated.

Rival bidder China Petroleum & Chemical Corporation or Sinopec had decided not to top the OVL offer, which was at a 61.9% premium to Imperial's closing share price on July 11.

If OVL acquires Imperial, it would be the third largest acquisition by an Indian company.

OVL's acquisition of Imperial Energy will give it access to Siberia, the snow desert region in far-east of Russia, which is believed to have huge hydrocarbon reserves.

Imperial's blocks in Siberia came through its 20% holding in the Sakhalin-1 project, which has oil producing blocks in Tomsk region of the western Siberia in Russia and Kastanai in north-central Kazakhstan with registered reserves of 450 million barrels.

Sharma said ONGC would explore five blocks in West Bengal, covering 16,500sq km, allotted under the NELP-7. ONGC would invest Rs 10,000 crore in five years for exploring the blocks.

He said that ONGC expects to produce 400,000 cu.m. of coal-bed methane per day from 20 wells in Jharia, across an area of 6 sqkm.

"In 1997-98 we discovered CBM in Jharia and from 2005 started developing it. By November end we expect to produce 50,000cu.m. per day from four wells in Parbatpura," Sharma said.