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GAIL, ONGC eye Exxon stake in Kashagan oilfield

GAIL, ONGC eye Exxon stake in Kashagan oilfield
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First Published: Wed, Jun 08 2011. 05 21 PM IST
Updated: Wed, Jun 08 2011. 05 21 PM IST
New Delhi/Astana: Two state-run Indian companies are interested in buying into the massive Kashagan oilfield in Kazakhstan should US major ExxonMobil Corp sell its stake, the head of one of the firms said on Wednesday.
B. C. Tripathi, chairman of gas company GAIL (India), told Reuters his company and Indian explorer Oil and Natural Gas Corp were interested in entering the potentially lucrative field in the Caspian Sea.
The Hindustan Times newspaper reported that ONGC Videsh Ltd—the overseas investment arm of ONGC—and GAIL were planning to acquire an 8.4% stake in Kashagan from ExxonMobil for about $5 billion.
“We are interested. In all such ventures abroad we are happy to work with OVL (ONGC Videsh Ltd),” Tripathi said, declining to elaborate further. Kashagan, the world’s biggest oil find in more than 40 years, is central to plans by Kazakhstan to pump an additional 60% of crude output by 2020. The vast Central Asian state holds about 3% of the world’s recoverable oil reserves.
ExxonMobil has never publicly stated an intention to sell any of its stake.
A source within the government of Kazakhstan, who spoke to Reuters on condition of anonymity, said the government had received no formal proposals related to a sale.
“The Kazakh side has information that Exxon had been working on the issue of searching for potential buyers for its stake in the Kashagan project. As far as I am aware, this process has stopped,” the source said.
“The government of Kazakhstan has not, to this day, received any official offer about the conclusion of any deals with regard to the sale of a stake from any one company to another.”
An international consortium has been developing the Kashagan project, which is due to begin production in late 2012 or early 2013, since the 1990s when it struck a deal with the then cash-strapped Kazakhstan government following the collapse of Soviet Union.
Kazakhstan, now Central Asia’s biggest economy, has grown more assertive over its natural resources, and state oil and gas company KazMunaiGas entered the project in 2005. It doubled its stake three years later to 16.8%. The other consortium members are Eni, Total, Royal Dutch Shell, ConocoPhillips and Japan’s Inpex.
Costly Second Phase
Negotiations between foreign investors and the state have run into trouble over the more lucrative and costly second phase of Kashagan’s development. Kazakhstan said in January it would not approve the second phase because of prohibitive costs. North Caspian Operating Company B.V., the consortium running the project, declined immediate comment. It previously said it was undertaking a “careful review” of the second phase.
With an apparent stalemate on talks over the second phase, industry executives in Kazakhstan say some of the shareholders have been exploring the possibility of exiting the project.
“I know that ExxonMobil has offered its stake in the project on the market,” said a source close to the project, on condition of anonymity because of the sensitivity of the subject.
The Hindustan Times reported that the consortium led by ONGC Videsh had submitted a “non-binding but firm indicative bid” to ExxonMobil for half of its 16.81 % stake in Kashagan oil. The newspaper cited documents related to the deal.
ConocoPhillips, in the midst of a plan to boost shareholder returns with share buybacks and higher dividends, has also been cited by analysts as a possible seller as it prepares to offload assets worth up to $17 billion.
“The government has not received any official offers,” the government source said when asked about ConocoPhillips.
India is the world’s fourth-largest oil importer, with imports covering about 80 % of its crude needs. It is scouting for oil and gas assets abroad to meet expanding refining capacity and energy demand in an economy growing by around 8.5% annually.
ONGC acquired 25% of the Satpayev oil block in Kazakhstan in April, although India generally has been less successful than rival China in tapping the energy riches of Central Asia.
Chinese companies control 22.5% of Kazakhstan’s oil output, although the government forecasts their share will drop to 8.9% by 2020. Such a prediction implies that a Chinese company would be unlikely to win a stake in Kashagan.
Indian companies would also need the blessing of Kazakhstan.
“According to the law and to the PSA (production sharing agreement), in any scenario Kazakhstan and KazMunaiGas will be among the priority acquirers of any stake sold by any company,” the government source said.
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First Published: Wed, Jun 08 2011. 05 21 PM IST
More Topics: ExxonMobil Corp | Kashagan | Oil | GAIL | ONGC Videsh |