New Delhi: A consortium of Indian companies led by state-owned Oil and Natural Gas Corp. Ltd (ONGC)’s overseas arm, ONGC Videsh Ltd, has bought a 10% stake in the UAE’s offshore oil and gas field Zakum, as India pursues overseas hydrocarbon assets while oil-rich nations resort to ways of reducing risk and balancing their budget deficits.

ONGC Videsh said late on Saturday night that the Indian side will pay a sign-up bonus of $600 million as part of the deal inked in Abu Dhabi between company executives and UAE officials in the presence of visiting Prime Minister Narendra Modi and Abu Dhabi crown prince Sheikh Mohammed bin Zayed Al Nahyan.

The deal gives the Indian consortium, which includes Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd’s overseas arm Bharat PetroResources Ltd, access to about two million tonnes of annual share from the field which produces about 400,000 barrels of oil a day.

Backed by diplomatic efforts, Indian energy companies have been aggressively pursuing a share in the world’s most prolific oil and gas fields. In 2016, Indian Oil, Oil India Ltd and Bharat PetroResources had bought stakes in two assets in Siberia owned by Russia’s state-backed PJSC Rosneft Oil Co. for $3.3 billion.

Although global oil prices have been rising recently, it is far below the $100-plus levels seen three years ago, forcing many oil-rich nations to narrow their budget deficits by selling assets and diversifying into non-oil sectors of the economy. US exporters stepping up their supplies is also helping to reduce the effectiveness of the supply cuts by the Organization of the Petroleum Exporting Countries (Opec), aimed at propping up prices. The UAE is a member of Opec.

“The trend in upstream oil and gas projects is to take a consortium approach which helps in mitigating the risk. Besides, building good relationship between the two nations is also a motivation for the deal," said K. Ravichandran, senior vice-president and group head, corporate ratings, at Icra Ltd.

In a statement, ONGC Videsh said the stake acquisition in Zakum is the first time that Indian oil and gas companies have been given a stake in the development of Abu Dhabi’s hydrocarbon resources. The deal has a term of 40 years.

“We are hopeful that this historic agreement will lead to further opportunities for Indian oil and gas companies to participate in the UAE’s energy sector," the statement said, citing chairman Shashi Shanker.

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