ONGC, Sistema to merge Russian oil & gas assets

State-run ONGC and Russian conglomerate Sistema have decided to merge their oil & gas businesses in Russia under a joint venture in a no-cash deal where the Indian firm will have a 25% shareholding with a say in management.

The merger of three companies, Bashneft, RussNeft and Imperial Energy, will make ONGC a shareholder in the Russian firms’ annual oil production of 25 million tonne and in the output of their refineries which have a capacity of 20 million tonnes besides discovered oil fields, Trebs and Titov.

State-run Indian Oil Corp (IOC), India’s largest refiner, will join ONGC in the venture, an oil ministry official said.

ONGC will merge its wholly-owned subsidiary Imperial Energy into the new company. ONGC Videsh, the foreign arm of the state-owned giant, India’s second-largest company by market capitalisation, had acquired Imperial in 2008 for $2.1 billion. Imperial produces about 1 million tonnes of crude oil annually and all its assets are in Russia.

Officials with direct knowledge of the matter said that ONGC would be practically managing oil and gas assets of the merged entity due to its experience. ONGC’s shares were down 0.26% at Rs 1,301.60 from the previous day’s close.

Sistema, a diversified group, had been scouting for a strategic partner with experience in oil and gas sector, ONGC’s chairman & managing director RS Sharma said in a statement. Sistema is a financial corporation that manages companies with a presence in telecommunication, high technology, energy, aerospace, banking, retail, tourism and healthcare services. The deal will be concluded by June 30, statements issued by ONGC said.

A Sistema statement said the prospective partners had agreed to jointly invest in future in “key” countries. The names of the key countries could not be ascertained.

“It is a frame-work agreement. We will soon negotiate specific terms of an agreement in this regard,” an ONGC official said. The frame-work agreement was signed on Tuesday by Sistema chairman Vladimir Evtushenkov and ONGC Videsh managing director RS Butola during Russian president Dmitry Medvedev’s India visit.

State-run oil companies are also interested in joining the consortium, the official said requesting anonymity. The proposed consortium would be led by ONGC Videsh.

The new firm will also hold Trebs and Titov, the major discovered fields estimated to have 200 million tonne recoverable reserves, equivalent to 35% of ONGC’s total crude oil reserves. The fields were awarded to Bashneft in a recent auction where ONGC had also participated but was disqualified. The deal is significant for a country like India that imports over 70% its oil and gas consumption.

Sistema has a 75% direct stake in Bashneft that produces 13 million tonnes of oil from fields in Russia. It also owns refineries with a combined capacity of 20 million tonnes. It has a 49% stake in RussNeft that producing 12 million tonnes of oil. Sistema has a presence in Indian telecom sector through Sistema Shyam TeleServices.

Source : ET

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Cheer gas

ONGC is banking on natural gas production to propel its future growth as industries wake up to the significance of the clean fuel in the fight against global warming. Gas production has become a profitable business for the company after the recent revision of administered (APM) prices. Margins are projected to go up further, as the country’s pipeline network widens, releasing suppressed demand for gas.

ONGC, interestingly, is adding more reserves of gas than crude oil to its asset portfolio. That would mean a higher share of gas in the company’s revenue in the years ahead. ONGC expects to increase natural gas production to 100 million standard cubic meter per day (mmscmd) by 2015 from 60 mmscmd now. “We have added gas reserves at a much faster pace in recent years compared to crude oil,” DK Pandey, ONGC’s director for exploration, told FE. “Natural gas is a clean source of energy and environment friendly. It is also becoming profitable now,” Pandey said.

When the government fixed the price for natural gas from Reliance Industries’ D6 field in the Krishna-Godavari basin at $4.2 per mmBtu in 2007, it was seen as fairly high then, given that RIL had quoted $2.34 per mmBtu in an opening bidding for the supply of 12 mmscmd gas to NTPC’s Kawas and Gandhar projects in 2003.

But more recently, the government has set a gas price for Gujarat state Petroleum Corporation’s DeenDayal field in the K-G basin at $5.7 per mmBtu. Now RIL is also pushing for a higher gas price for D6.

Global upstream investment saw an 18% decline in 2009 as the industry was forced to cut down on its spending in the face of economic recession. In contrast, ONGC maintained its exploration pace. That has helped the company clock the highest ultimate reserve accretion in the last two decades.

ONGC added 83 million tonnes of oil and oil equivalent gas reserves in the fields operated by it in 2009-10. On a cumulative basis, ONGC has added over 250 million tonnes of oil and oil equivalent reserves in the last four years.

“Being a national oil PSU, we have to keep investing in exploration,” Pandey reasoned. ONGC has set a capital expenditure target of Rs 1,30,000 crore for the 11 th Plan—a 47% hike over the previous plan.

The company has already spent about 67% of the allocated fund during the first three years of the Plan. It has earmarked about Rs 24,000 crore for financing its domestic exploration work in the current financial year. At this pace, ONGC is likely to exceed the exploration spending target for the current Plan.

The company has targeted to drill 154 exploratory wells compared with 128 in 2009-10. The ten-year average success rate for the company works out to 1:2.5, which compares favourably with the industry ratio of 1 to 3. “Giant fields are discovered only in virgin areas. It is our mandate to explore the hydrocarbon potential of all sedimentary basins in the country,” the ONGC director explained

Source: Financial Express

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ONGC plans to invest $5 bn to develop gas fields to boost output by 60 pc

Oil & Natural Gas Corporation plans to spend $5 billion to develop gas fields to boost output by almost 60% in six years, two people with direct knowledge of the matter said. 

The New Delhi-based explorer sought permission from the oil and gas regulator on July 16 to invest the funds in nine natural gas discoveries off India’s east coast to produce 35 million cubic metres a day by 2016, one person said, declining to be identified before the directorate general of hydrocarbons approves the plan. 

The amount is triple ONGC’s planned spending on its largest oil field and follows the government’s decision in May to double the price at which the explorer sells gas. India is ramping up gas output at the fastest pace in the world, according to BP’s 2010 Statistical Review of World Energy, after companies including Reliance Industries discovered new fields. “ONGC has been discovering new reserves for a while but the concern is being able to convert them to production,” said Rohit Ahuja, a Mumbai-based analyst with Centrum Broking in Mumbai. “The company is looking to address this with the very good discoveries they have in the east coast.” 

The producer of almost 25% of the crude oil used by India is starting new fields at home as output declined at aging areas off the west coast. Reserves added in fields operated by ONGC in the year ended March was the equivalent of 82.98 million metric tonne, the highest in the past 20 years, the explorer said April 26.

Source: Economic Times

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ONGC: Expressed Interest to Buy BP Stake in Vietnam Gas Block

Oil & Natural Gas Corp. has expressed its interest to Vietnam Oil and Gas Group, or PetroVietnam, to buy BP PLC's stake in a gas block in Vietnam, the chairman of India's state-run oil and gas explorer said Thursday.

"Yesterday we have indicated our willingness to PetroVietnam to buy BP's stake. Let us see now," R.S. Sharma told Dow Jones Newswires.

BP holds a 35% stake in the block and is also the operator. ONGC owns 45%, while PetroVietnam has the remaining 20%.

BP announced Tuesday that it has agreed to sell assets in the U.S., Canada and Egypt to U.S. oil company Apache Corp. for $7 billion. BP also said it plans to sell gas fields and a pipeline in Vietnam, as well as exploration licenses in Pakistan to help pay for damages related to the Gulf of Mexico oil spill.

Source : online.wsj.com

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Government approves $5.25 per mmBtu for ONGC gas

The government has approved a higher price of gas for ONGC’s C-Series fields in Mumbai offshore taking a step forward in its policy to bring all gas prices closer to market-determined rates. 

The C-Series gas priced has been fixed at $ 5.25 per million British thermal unit (mmscmd), which almost a dollar higher than the price at which Reliance Industries sells gas from the its fields in Krishna Godavari basin. 

Reliance gets $ 4.215 per mmBtu for the gas it produces from KG-D6 fields. The price for ONGC is a tad lower than $ 5.5 per mmBtu which it had sought earlier, said a oil and gas ministry official. 

The government had recently increased the price of gas sold at controlled price (administered price mechanism or APM gas ) by state owned upstream oil companies to $ 4.2 per mmBtu bringing it at par with KG D-6 gas. 

Natural gas produced from C-Series fields is sold to Gail which further markets it to end users. ONGC began production from C-Series fields last month and is currently producing between 0.8 to 1.2 million standard cubic meters per day from the wells drilled so far. 

The peak output from the field is expected to be 2.8 mmscmd after all the 15 wells are drilled after monsoon season. 

Source: Economic Times

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