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OVL may partner Russian oilco for Imperial deal, awaits watchdog's nod

ONGC Videsh, which is awaiting approval from Russian authorities to acquire the UK-based Imperial Energy, has kept its options open of roping in one of the Russian national oil companies.

, ET Bureau|
Sep 20, 2008, 05.19 AM IST
ONGC Videsh, which is awaiting approval from Russian authorities to acquire the UK-based Imperial Energy, has kept its options open of roping in one of the Russian national oil companies ��� Gazprom or Roseneft ��� as a partner to seal the $2.5 billion deal.

ONGC Videsh Ltd (OVL)���s move to acquire the UK-based Imperial Energy is under the lens of the Russian regulator, Federal Antimonopoly Service (FAS). Under the Russian rules, the regulator would verify whether an acquisition could be termed as strategic.

With a view to ensure national defence and state security, the recently-enacted Russian law restricts foreign investors to pick up equity stakes in business entities having strategic importance. The law is applicable on all transactions that would lead to management control of such economic entities. Exploration and production (E&P ) of natural resources is one of the 42 identified activities under the said legislation.

FAS is expected to give its verdict by the second week of October. OVL has already submitted an application to the regulator in this regard, sources said. Interestingly, the Imperial deal is the first major acquisition case before the Russian agency FAS after the country enforced the new law for foreign investments in business entities of strategic importance on April 29, 2008.

Experts in the know, however, are hopeful that the deal may go through without much problem due to two main reasons; firstly, the individual fields of Imperial Energy have recoverable hydrocarbon reserves much below than the specified limit (stated to be 70 million tonne) to make it of ���strategic��� importance.

Secondly, due to India���s historic ties with Russia, the deal is unlikely to face any major political opposition. According to Indian officials, the approval of the Russian regulator is expected before the proposed India visit of President Dmitry Medvedev by the end of this year. It is learnt that petroleum minister has already spoken to the Russian President about the acquisition.

It is likely that Russia may want OVL to offer a stake in Imperial Energy to its oil companies as a deal, an official close to the development said. Officials in the ONGC said that the company is open to any such proposal as it would like to join hand with a local strategic partner. ���We have government���s approval for the same,��� a senior ONGC official said.

OVL, the foreign arm of public sector oil major ONGC, had last month got approval of the Imperial Energy���s board for its 1,250 pence a share bid for the company. OVL has a 20% stake in Sakhalin-1 project in Far East Russia. Acquisition of Imperial will give it an access to Siberia, an area believed to hold huge hydrocarbon deposits.
Besides in Russia, Imperial has assets in Kazakhstan .

The company, which is currently producing 11,000 barrels oil per day (bopd) is expected to raise its production to about 35,000 bopd by end 2009. The company has bagged a new production licence Golovnoye field (block 74) in the Tomsk region. According to an independent audit Imperial���s 2P reserves is estimated at 920 million boe (barrel oil equivalent) and 3P reserve is 3.4 billion boe.

ONGC���s Sharma feels sorry for RIL���s gas rates

This could be music to Reliance Industries (RIL) chairman Mukesh Ambani���s ear. Public sector oil major ONGC���s chairman & managing director RS Sharma said on Friday that he feels sorry for RIL for selling the KG basin gas dirt cheap.

���I���m sorry for those who are forced to sell gas at $4.20/mmBtu (million British thermal unit),��� he said while demanding a price revision of administered price mechanism (APM) gas sold by ONGC. ONGC is losing around Rs 700 crore for selling APM gas at around $2/mmBtu. The spot price of natural gas is stated to be around $18-19 /mmBtu.
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