Kazakhstan remained non-committal on supporting state-owned Oil and Natural Gas Corp's USD 5 billion acquisition of ConocoPhillips' stake in the Central Asian nation's giant Kashagan oilfield.
Kazakhstan remained non-committal on supporting state-owned Oil and Natural Gas Corp's USD 5 billion acquisition of ConocoPhillips' stake in the Central Asian nation's giant Kashagan oilfield. In its biggest acquisition till date, ONGC Videsh Ltd, the overseas arm of state explorer on November 26 last year agreed to pay US energy giant ConocoPhillips about USD 5 billion for the 8.4 per cent stake in Kashagan, the biggest oilfield discovery in over four decades.
The deal is subject to the approval of governments of Kazakhstan and other partners in the Caspian Sea field waiving their right of first refusal. "As per law, companies (partners) have 60 days (from the date of the deal to decide on pre-emption rights) and the government has 180 days thereafter," Kazakhstan's Vice Minister for Oil and Gas Bolat Akchulakov told PTI.
Indian Oil Minister M Veerappa Moily raised the issue of clearance to the deal when he met the visiting minister at the meeting of the India-Kazakhstan Joint Commission. The partners have till January 25 to decide on their pre-emption rights. If they dont, it would be deemed that they have waived their first right of refusal. Asked about Kazakhstan government's stand on the deal, the Akchulakov said, "I just now cannot say anything on this. It is very difficult. I am not in a position to comment". He said the decision to approve or not approve the deal is to be decided by related ministeries in due course of time.
"This process is basically being screened by the related ministeries. The issue is under consideration of these ministeries," he said. Pressed for a comment on how Kazakhstan government viewed the acquisition, he said, "I cannot say anything". Italy's Eni, the operator of the first phase of the Kashagan oilfield that is due to start production in second quarter of 2013, has publicly stated that it will not pre-empt or block the sale.
Eni, ExxonMobil of US, Royal Dutch Shell, France's Total and Kazakhstan's Kazmunaigas (KMG) hold 16.81 per cent stake each in the field, while Japan's Inpex the remaining 7.56 per cent. On Kazmunaigas exercising pre-emption rights, Akchulakov said, "it is a corporate decision. We are government and we are not responsible for corporate decision. It is corporate body and it is corporate policy".
Once all the six companies in the project waive their pre-emption rights, the deal will go before Kazakhstan government, which contractually has 180 days to clear it. Sources said on the previous two occasions when companies sold out of Kashagan, the other partners pre-empted. The Indian government approval to the acquisition is likely to come by the month end.
Originally, Kashagan field had Eni, BG Group of UK, ExxonMobil, Shell, Total and Kazakh government with 14.28 per cent stake each. BP had 9.52 per cent and Norway's Statoil 4.76 per cent. Inpex of Japan and ConocoPhillips entered the consortium in 1998, purchasing Kazakhstan's 14.28 per cent share. In 2001, when Total agreed to buy BP and Statoil's stakes, all other partners exercised their pre-emption rights and the stake was equally split among them.
Subsequently, the shareholding in the project was -- BG, Eni-Agip, ExxonMobil, Shell and Total (16.67 per cent each), ConocoPhillips and Inpex (8.33 per cent each). Then again in 2003, when BG agreed to sell its 16.67 per cent interest to Chinese state duo Sinopec and China National Offshore Oil Corp (CNOOC), the pre-emption rights were exercised. Kazakhstan purchased half (8.33 per cent) of BG's share while other consortium members shared the remaining.
In 2008, a new contract was signed wherein KMG's share was doubled from 8.33 per cent to 16.66 per cent with other partners taking proportionate cuts. Under Kazakh law, KMG would have the first option to purchase Conoco's stake and in October the company had publicly expressed interest in Conoco's holding.
After years of delay and at a total cost of more than USD 40 billion, Kashagan is due to begin production in second quarter of 2012, sources said. Kashagan holds 33 billion barrels of inplace oil reserves, of which about 10 billion are potentially recoverable. Of this, OVL's share will be 842 million barrels. The Kazakhstan government has approved first of the three phases and production is likely to start in second quarter of 2013.
At approved peak from phase-1, OVL's share will be close to 1.6 million tonnes, sources said adding over 25-year period the company's share comes to an average of 1 million tonnes per annum. Kashagan, the biggest world oilfield discovery since 1968, may produce 370,000 barrels of oil per day at peak and in subsequent phases, the output may rise up to 450,000 bpd (22.5 million tonnes per annum). When Phase 2 and 3 are implemented, the OVL's share will be significantly higher, they added.
ONGC stock price
On November 21, 2014, Oil and Natural Gas Corporation closed at Rs 383.60, down Rs 2.4, or 0.62 percent. The 52-week high of the share was Rs 472.00 and the 52-week low was Rs 264.00.
The company's trailing 12-month (TTM) EPS was at Rs 26.00 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 14.75. The latest book value of the company is Rs 159.81 per share. At current value, the price-to-book value of the company is 2.40.
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