New Delhi: The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved ONGC Videsh Ltd’s (OVL) acquisition of stake in an Azerbaijan oilfield for $1.001 billion.

The CCEA headed by Prime Minister Manmohan Singh approved OVL acquiring US energy major Hess Corp’s 2.7213% in the Azeri, Chirag and the deep water portion of Guneshli fields in the Azerbaijan sector of the Caspian Sea and 2.36% interest in the Baku-Tbilisi-Ceyhan (BTC) pipeline. The CCEA authorised “OVL to incur expenses so as to keep the total exposure up to the approved amount that is $1.001 billion at all times," an official statement issued said. OVL will get about 1 million tonnes per annum of oil for about a decade.

“In addition to oil revenue, the investment would enable OVL to enter into Azerbaijan, which is rapidly emerging into a strategically important country in the CIS region," it said. Acquiring a stake in the strategic BTC pipeline would provide OVL the opportunity to enhance its portfolio around the region and transport crude from future assets, which the company may acquire in the Caspian Sea in the future.

ACG, which is located in the south Caspian Sea, about 95 km off the coast of Azerbaijan, is the largest oil and gas field complex in Azerbaijan and one of the largest producing oil fields in the world. The UK’s BP Plc operated field produces around 700,000 barrels a day (35 million tonnes per annum) of crude oil. This is more than India’s annual oil production.

OVL’s share of output would be over 19,000 bpd or a little less than one million tonnes per annum. While the ACG field has total reserves of over 6.5 billion barrels, the 1,768-km BTC pipeline is one of the main export routes for Caspian crude oil production to the Ceyhan terminal in the Mediterranean Sea in south east Turkey, with a capacity of around 1.0 million bpd.

UK’s BP plc is the operator of the ACG fields with 34.1% stake. Other partners include Chevron (10.2%), State Oil Company of Azerbaijan Republic (SOCAR 10%), Inpex (10%), Norway’s Statoil (8.6%), ExxonMobil (8%), Turkish national oil company TPAO (6.8%), Chevron (5.6%) and Japanese Itochu (3.9%).

As part of the deal, OVL will also buy Hess’ 2.36% stake in BTC export pipeline. The pipeline transports crude oil from Azeri capital city of Baku to the Mediterranean port of Ceyhan in Turkey through Georgia. OVL is present in 15 nations including Brazil, Colombia, Cuba, Iran, Iraq, Kazakhstan, Libya, Myanmar, Nigeria, Russia, South Sudan, Sudan, Syria, Venezuela and Vietnam.