OVL eyes additional equity in Rosneft assets

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New Delhi | Published: October 22, 2015 12:52:07 AM

Its $2.4-billion investments in the UK-listed Imperial Energy’s assets in Russia’s Tomsk region since 2009 may have came a cropper with no resolution of the issue is in sight...

ONGCIn FY15, OVL’s production went up by 6% to 8.87 million tonnes of oil equivalent (mtoe) against 8.36 mtoe in FY14. In the current fiscal, it targets to cross 9 mtoe output. (Reuters)

Its $2.4-billion investments in the UK-listed Imperial Energy’s assets in Russia’s Tomsk region since 2009 may have came a cropper with no resolution of the issue is in sight, but state-run ONGC Videsh (OVL) continues to bet big on Eurasian hydrocarbon reserves. Helped by a series of warm meetings between Prime Minister Narendra Modi and Russian President Vladimir Putin in recent months, OVL is negotiating to buy equity stakes in some producing fields of Rosneft, the Moscow-based world’s largest publicly traded petroleum company.

Sources say OVL may pick up 5-10% more in Rosneft’s Vankor oilfield in East Siberia in which it bought a 15% share last month. Two other Rosneft assets are also on its radar, they said, adding that OVL and Rosneft had discussions about the latter’s Yurubcheno-Tokhomskoye oilfields.

OVL, India’s primary vehicle for acquiring energy assets overseas, has made cumulative investments of $25 billion in foreign hydrocarbon assets so far.

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Its production hasn’t been rising in recent years (see graph) due to a variety of issues including, according to analysts, some overpriced buys like Imperial Energy.

Currently, external affairs minister Sushma Swaraj is in Moscow to take part in the India-Russia Inter-Governmental Commission meeting in which the two nations are talking out issues related to space, defence, energy and trade. Modi during his meetings with Putin in New Delhi in December last year and in Ufa in July this year had raised the issue of enhancing cooperation in the oil and gas sector between India and Russia.

On Tuesday, Reuters quoted Narendra K Verma, managing director of OVL, as saying that it is targeting $10-12 billion of oil and gas asset purchases over the next three years, including more corporate acquisitions. “Earlier it was an asset-based (strategy) but now we are giving good consideration to M&A… Our mandate is huge and we can acquire a larger portfolio through the corporate acquisition route,” Verma said.

The Vankor oilfield in East Siberia, which has been under production since August 2009, produces more than 442,000 barrels of oil per day, double the output of Barmer, India’s largest onshore field, which is operated by Cairn India. OVL share would be around 66,000 barrels per day given the current 15% stake.

The Yurubcheno-Takhomskoye asset is also a discovered project and OVL, sources said, is evaluating picking up a 49% stake. The project has the potential to produce 1 billion barrels per annum after three years.

In July, Rosneft came under US sanctions imposed on the country for its actions in Ukraine. The firm has sought financial support of $40 billion to offset sanction-hit measures. According to an industry watcher, Rosneft is trying to sell stakes in its prolific assets to mop up funds. Interestingly, Putin has also invited China to invest in the oilfields.

In FY15, OVL’s production went up by 6% to 8.87 million tonnes of oil equivalent (mtoe) against 8.36 mtoe in FY14. In the current fiscal, it targets to cross 9 mtoe output.

Output from the Imperial Energy asset has drastically dropped to just 7,000 barrels per day now against forecast of 80,000 barrels per day. In a bid to turn Imperial Energy around, OVL is seeking a slew of tax concessions.

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