State-owned Indian Oil Corporation (IOC), Oil India (OIL) and Bharat PetroResources (BPRL), among themselves, will pay Russia’s Rosneft $3.3 billion for buying equity stakes in the latter’s two oil and gas projects in September, two officials privy to the deals told Siddhartha P Saikia in New Delhi.
In one of the deals, IOC, OIL and BPRL are picking up 29.9% in the Rosneft-operated Taas-Yuryakh oil and gas fields in East Siberia for $1.28 billion. Besides this, the consortium would fork out another $2.02 billion for 23.9% stake in Rosneft arm Vankorneft that runs the Vankor oil field in East Siberia, the sources added.
“The deal size includes acquisition cost and share of 10-year capital expenditure programme. The Taas-Yuryakh fields are under development, while Vankor is a developed asset,” said the first official.
Talking about risk in investing in oil and gas assets, the official said that due diligence for the “economic viability” of the projects have been carried out in different price scenarios in the range of $40 to $60/barrel.
Of the total cost, IOC would shell out $1.2 billion; its board has given the go-ahead for the same. The oil refining and marketing company is likely to borrow funds to pay for the acquisition.
On the other hand, OIL could out fork out from its cash reserves, which is in excess of `10,000 crore as on March 30.
Petroleum minister Dharmendra Pradhan, along with top executives of these firms, visited St Petersburg in early June to ink final agreements. New Delhi’s interest in increasing economic cooperation with the Kremlin was reflected in several rounds of talks between Prime Minister Narendra Modi and Russian President Vladimir Putin.
“The diplomatic relations with Russia has reached such heights that it will ensure India’s energy security for a long term,” Pradhan said. “Indian companies are investing in various oil projects in Russia and the investments are expected to reach $5 billion to $6 billion.”
Rosneft’s chief executive Igor Sechin visited New Delhi in March to sign the preliminary heads of agreement for these acquisitions with Indian companies. Rosneft, impeded by US and European financing bans over the conflict in Ukraine, is eyeing investments from Asia to fund expansion. India, the third biggest oil importer, is seeking to enhance energy security amid low oil prices by tying up new sources of crude oil.
State-controlled Rosneft is the world’s top listed oil producer by output. Currently, the Taas-Yuryakh asset is producing 20,000 barrels of oil per day with expected peak production of 100,000 bopd by 2021. The Vankor oil field in East Siberia produces more than 4,42,000 barrels of oil per day, double the output of Barmer, India’s largest onshore field, which is operated by Cairn India.