India's ONGC has lost the
giant Kashagan oilfield to the Chinese after Kazakhstan blocked its USD 5
billion deal to buy US energy major ConocoPhillips' stake in the Caspian Sea
oilfield. ONGC Videsh, the overseas investment arm of state-owned Oil and
Natural Gas Corp (ONGC), had in November last year struck a deal to buy
ConocoPhillips' 8.4 per cent stake in Kazakhstan's biggest oilfield, Kashagan
for USD 5 billion. As per Kazakh law, the Central Asian nation had the right of
first refusal or pre-emption rights that allowed it an option to step in and
buy the stake at the price agreed between the Indian firm and ConocoPhillips.
The Kazakh government has decided to exercise its ROFR and acquire the stake
held by ConocoPhillips, sources with direct knowledge of the development said.
The Central Asian country's Oil and Gas Ministry has informed ConocoPhillips
its national oil company KazMunaiGaz will buy the US oil company's 8.4 per cent
interest in the world's largest oil find in five decades for about USD 5
billion. This stake will then be sold to China National Petroleum Corp (CNPC)
for a reported USD 5.3-5.4 billion. Kashagan, a Caspian Sea field set to
produce 370,000 barrels of oil a day, is to start output by September, eight
years later than initially planned and with costs nearing USD 48 billion,
double the early estimates. According to Kazakh law, the government has the
right to buy any oil asset for sale in the country at the price agreed on by
the buyer and seller. While ONGC got nod of the partners for acquisition of
ConocoPhillips stake at end of January, Kazakh government had time till July to
approve the transaction. Exxon Mobil, Royal Dutch Shell, Italy's Eni, Total of
France and KazMunaiGaz each hold 16.8 per cent of Kashagan. Japan's Inpex Corp
has 7.56 per cent. India has lost at least USD 12.5 billion of deals to China
in past years. CNPC beat India by agreeing to pay USD 4.18 billion in August
2005 for PetroKazakhstan, then China's biggest overseas oil deal. At that time,
Oil Minister Mani Shankar Aiyar had stated that India's bid for PetroKazakhstan
was thwarted as the "goalposts were changed after the game began."
The Chinese firm had trailed ONGC and its partner Lakhsmi N. Mittal's USD 4
billion bid at the close of bidding on August 15, 2005. But post-close of
bidding, it was allowed to raise the offer price to USD 4.18 billion, which saw
PetroKazakhstan, a Canadian oil firm operating in Central Asia, go to CNPC. A
month later, CNPC against outbid ONGC in buying assets of Encana Corp in
Ecuador for USD 1.42 billion. In March 2010, ONGC lost out on acquisition of
oil Block 1 and 3A in Uganda oilfields to China's Cnooc who offered as much as
USD 2.5 billion for the 50 per cent stake. In May 2011, ONGC lost a bid to buy
Exxon Mobil Corp's 25 per cent stake in an Angolan oil field. ONGC had offered
about USD 2 billion for the stake in Block 31 off Angola's coast.
Kazakhstan, home to 3 per
cent of the world's recoverable oil reserves, has moved in recent years to
exert greater management control and secure bigger revenues from foreign-owned
oil and gas projects. Kazmunaigas entered the Kashagan consortium as a
shareholder in 2005 and has since then doubled its stake to 16.81 percent.
Kashagan, with reserves estimated at 35 billion barrels of oil in place, is
expected to produce its first oil in September.
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