Lakshmi Mittal doubles his stake in Ophir Energy

Lakshmi Mittal doubles his stake in Ophir Energy

New Delhi: Steel magnet Lakshmi N Mittal has paid over $110 million to double his stake in Africa- focused Ophir Energy Plc to 21.2% even as he exited the oil and gas business in the Central Asian nation Kazakhstan.

“We would like to confirm that we recently doubled our investment in this (Ophir Energy) company," said Sudhir Maheshwari, managing director of Mittal Investment Sarl, the holding company of Mittal family interest.

He however, refused to divulge financial details saying both Mittal Investment and Ophir were private companies.

Industry sources said Mittal Investment had in May 2008 agreed to buy 47 million shares in Ophir Energy at 250 pence a share in two tranches.

In the first tranche it bought 21.1 million shares for $105.3 million in May 2008 and recently it subscribed to the second trance of 26,421,790 new shares for about $113 million to double its stake to 21.2%.

Established in 2004, Ophir is an independent oil and gas exploration company with a diversified exploration portfolio encompasing 16 projects in 8 different African jurisdictions.

With this, Mittal Investment has become the largest shareholder in Ophir Energy, overtaking its Mvelaphanda Holdings Pty Ltd, the South African industrial and resources conglomerate founded by Ophir’s non-executive chairman Tokyo Sexwale. Mvelaphanda now has 17.9%.

Sources said Mittal has appointed Harak Bhantia and Rajan Tandon on the board of Ophir which has assets in Senegal (1 block), Congo Brazzaville (1 block), Equatorial Guinea (1 block), Gabon (4 block), Nigeria - Sao Tome (1 block), Saharawi Arab Democratic Republic (4 blocks), Somaliland (1 block) and Tanzania (3 blocks).

Maheshwari said Mittal Investment has pulled out of a project to develop an oil field in Kazakhstan in partnership with Oil and Natural Gas Corp (ONGC).

“Mittal Investments has decided that it does not wish to pursue the investment opportunity in Satpaev. This will now be developed by ONGC Videsh alone."

Two years ago, Mittal Investment used Kazakh government to muscle its way into the Satpayev oilfield in the Caspian Sea where ONGC Videsh Ltd, the overseas arm of the state-run firm, was shortlisted for a stake. However, on the eve of signing an agreement for the field, it decided to pullout.

Mittal, which had dumped OVL in April 2007 to acquire 50% stake in Caspian Investments Resources (CIR) from Russian oil firm Lukoil for $980 million, is now looking at selling its interest in the firm.

The stake was first offered to OVL which has declined, Maheshwari said without elaborating.

Sources said Mittal is now looking for buyers including those in China to sell its stake in CIR. LUKOIL which holds the remaining stake in CIR, may also be a potential buyer.

OVL, which in 2007, relented to the Kazakh government’s condition of getting Mittal in the highly prospective Satpayev field, has written to the Kazakh government saying the 25 per cent stake in Satpayev would now be acquired by it and not by ONGC-Mittal Energy Ltd- the joint venture it had with Mittals.

CIR acquisition was also to be done by OMEL but the India-born billionaire went ahead on his own citing opposition to OMEL from LUKOIL.

Sources said Mittal has now decided to exit oil and gas business in Kazakhstan and so offered its stake in CIR to OVL who declined it apparently because it thought the company was a sinking ship with oil production falling and actual reserves not matching the annouced figures.

Sources said OVL had anticipated that Mittal may not continue with Satpayev and so had few months back sought specific permission from the Cabinet to go ahead with its investment the entire $400 million in the field on its own. Kazakh national oil firm KazMunaiGas will be the operator of the field, holding remaining 75 per cent stake.

An Exploration and Production Contract which would be signed soon.

The Satpayev block, situated in the Pre-Caspian Basin of Kazakhstan in Caspian Sea, covers an area of 1,582 square kilometere.

OMEL, and now OVL, is to pay $26 million as signing amount to the Kazakhstan government for 25% stake in Satpayev field. Besides, it would also pay $80 million as one-time assignment fee.

Over and above these, it has committed a minimum exploration investment of $165 million and an additional optional exploration expenditure of $235 million.

Satpayev is situated in highly prospective region of North Caspian Sea and in proximity to at least four fields. A peak output of 287,000 barrels per day is envisaged from the 256 million tons of reserves in the field.

Kazakhstan had initially identified Satpayev and Makhambet blocks in the Caspian Sea for giving 50% stake in either of them to OVL. Later, it reduced the stake on offer to 25% on condition that OVL team up with Mittal, who has steel plants in that country.

OVL relented and in June 2007 made a proposal to KazMunaiGas, but in subsequent negotiations Kazakhstan’s state-run firm did not agree on the percentage of stake OVL would get. It also dererred on giving operatorship to OVL during exploratory and appraisal stages.

CIR owns Nelson Resources, which LUKOIL purchased for $2 billion in 2005. Nelson carries out oil and gas production projects in Kazakhstan. It has oil production assets in the Kazakh oilfields of Alibekmola, Kozhasai, Severnye Buzachi, Karakuduk and Arman.

The current production from the fields, is less than 40,000 barrels per day and is falling.