4 oil PSUs sign deals worth $2 b to raise stake in Russian fields

National oil companies — ONGC Videsh Ltd, Oil India Ltd, Indian Oil Corporation Ltd and Bharat PetroResources — and Russia’s Rosneft have signed two separate memorandums of understanding, one Heads of Agreement, and one sale purchase agreement worth $2 billion on Wednesday to increase India’s participation in the Siberian oil and gas fields.

The first MoU was signed between ONGC Videsh Ltd (OVL), the overseas investment arm of ONGC, and Rosneft that would enable the Indian company to raise its stake in Vankorneft, the operator of the Vankor oil and gas field in Siberia, to 26 per cent from the existing 15 per cent.

Indian officials said that the additional 11 per cent stake would cost OVL anywhere between $800 million and $900 million. With the additional stake, the company share in production from the Vankor fields will rise by another 45-50,000 barrels of oil equivalent a day, the OVL official said.

A Heads of Agreement (HoA) was signed by IndianOil, Oil India and Bharat PetroResources with Rosneft to pick up a 23.9 per cent stake in Vakorneft. This would raise India's stake in the Vankor field to 49.9 per cent (26 per cent of OVL and 23.9 of the other Indian consortium).

The HoA envisages the possible execution of legally binding documents with regard to the sale and purchase transaction later in the year.

IndianOil, Oil India and Bharat PetroResources also signed a sale purchase agreement with Rosneft to give the Indian companies a 29.9 per cent stake in the Taas-Yuryakh fields in Eastern Siberia. A senior official of IndianOil said the deal is worth $1.28 billion.

Besides this sale purchase agreement, the Indian consortium also committed to $180 million towards the future capital expenditure requirements of the Taas-Yuryakh fields.

Current production from the fields is 20,000 barrels of oil equivalent a day of which India’s share would be 29.9 per cent. The production is expected to increase to 100,000 barrels of oil equivalent per day in the next five years.

An MoU between IndianOil, Oil India and Rosneft was signed last December for a stake in the Taas-Yuryakh fields. However, Bharat PetroResources, the exploration and production arm of Bharat Petroleum Corporation Ltd joined the negotiations later and is now a part of the sale purchase agreement.

The Indian consortium also signed an MoU for acquisition of a stake in Vankor clusters. This is a cluster of three small fields – Suzunskoye, Tagulskoye and Lodochnoye – around Vankor. The MoU envisages a potential partnership with the scope of the development of these fields.

“The co-operation is aimed at the creation of vertically integrated model, allowing India partners to participate in the upstream sector in Russia, while opening the growing India market to Rosneft. The reached agreements represent a shift from energy dependency to energy partnership of both countries,” said Igor Sechin, Chairman of the Management Board, Rosneft.

Essar Oil deal Rosneft expects to complete its purchase of a 49 per cent stake in Essar Oil in 2016. The company had last year signed a term-sheet to purchase 49 per cent stake in Essar Oil, which owns the 20 million tonne per annum Vadinar refinery and has 1,700 retail outlets.

“During my visit, we have had constructive negotiations with the management of Essar. Preliminary agreement has been achieved on the terms and procedures to complete the deal. We intend to close the transaction by end-2016 by obtaining all the necessary permits,” said Sechin.

The deal with Essar also included delivery of crude oil from Russia. Sechin said the two parties have agreed that deliveries will begin this year.

Prashant Ruia, Director, Essar, said Rosneft has completed satisfactory due diligence of Essar Oil. The parties intend to close the transaction by June 2016 following the execution of mutually agreed binding documents and after receipt of necessary approvals.