India's public sector oil companies led by Oil and Natural Gas Corporation's (ONGC) foreign arm ONGC Videsh Limited (OVL) on Wednesday inked pacts to buy stakes in two lucrative Russian oilfields in Siberia for an estimated $4.2 billion (around Rs 28,253 crore).
Russia's national oil company Rosneft, which needs to pay off debts incurred in its $55-billion acquisition of TNK-BP in 2013, is selling almost half of its most promising assets to Indian firms in the deal.
Under the agreements, OVL will increase its stake in Rosneft's Vankor project to 26 per cent while Oil India Limited (Oil), Indian Oil Limited (IOL) and Bharat Petroresources will buy up to 23.9 percent between them in the same field.
Vankor has recoverable reserves of 2.5 billion barrels. Indian public sector oil companies are expected to get access to about 12 million tonnes of oil a year once they complete acquisition of the 49.9-per cent stake of Rosneft, the world's top listed oil producer by output.
The agreements were signed in the presence of petroleum minister Dharmendra Pradhan on the second day of Rosneft chief executive officer Igor Sechin's two-day visit to India.
Once the deals go through, Rosneft will retain 50.1-per cent stake in Vankor while Indian companies will hold 49.9 per cent. Acquisition is subject to relevant Board, government and regulatory approvals and expected to close by September 2016.
Western sanctions imposed on Russia following the trouble in Ukraine and annexation of the Crimean peninsula have hurt the country's economy and companies like Rosneft are facing problems in marketing their oil and gas.
The deals signed on Wednesday will also give Russian oil companies access to the fast growing Indian market.
Rosneft holds 80 per cent shares while BP PLC (UK) holds 20 per cent in TYNGD through their respective subsidiaries. TYNGD produced 20,000 barrels of oil per day (bopd) with expected peak production of 100,000 bopd by 2021.
Oil, IOL and a subsidiary of Bharat Petroleum Corporation Limited signed a sale purchase agreement for 29.9-per cent stake in Tass-Yuriakh oilfield from for $1.28 billion, top officials said. The consortium also signed heads of agreement with Rosneft for taking 23.9-per cent stake in Vankor oilfield for just more than $2 billion. Simultaneously, OVL, which had in September last year bought 15 per cent in the Vankor for $1.26 billion, signed an MoU to increase its stake in the Siberian oilf ield to 26 per cent by paying an additional $925 million. The IOC-led consortium also signed another MoU with Rosneft for exploring taking stake in development of Vankor cluster fields of Suzunskoye, Tagulskoye and Lodochnoye.
Sechin told the media that the pacts will allow Indian partners to participate in Russian upstream sector and also open the growing Indian market to Rosneft. While the IOC-OILBharat PetroResources deal for 29.9 per cent stake in Tass-Yuriakh oilfield is a concluded agreement, the consortium's Vankor deal is an initial pact and a salepurchase agreement is yet to be concluded. Similarly, OVL's increase in stake in Vankor too is yet to be concluded.
Taas-Yuriah oilfield, which holds recoverable reserves of 137 million tonnes, produces 20,000 bpd. The output is slated to rise to 100,000 bpd in two years, officials said.
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