ONGC-ConocoPhillips deal rests on partners nod

Oil and Natural Gas Corp's $5 billion deal to buy 8.4 per cent stake in Kazakhstan's Kashagan oilfield may fall if ExxonMobil or Shell were to exercise their pre-emption rights within 60 days.

In its biggest acquisition till date, ONGC Videsh Ltd, the overseas arm of state explorer, on Monday agreed to pay US energy giant ConocoPhillips $4.25 billion purchase price plus a share of working capital and other cash calls together with interest for the 8.4 per cent stake in Kashagan, the biggest oilfield discovery in over four decades.

The deal is subject to approval of governments of Kazakhstan and India and also to other partners in the Caspian Sea field waiving their pre-emption rights, OVL Managing Director Dinesh K Sarraf said.

Italy's Eni, Royal Dutch Shell, France's Total, ExxonMobil of US and Kazakhstan's KazMunayGas have 16.81 per cent stake each, while Inpex of Japan has the remaining 7.56 per cent.

"ConocoPhillips has already intimated the partners about the deal and they now have 60 days to decide if they want to exercise their right of first refusal (also called pre-emption rights)," he said.

One or more partners deciding to exercise their ROFR would need to pay ConocoPhillips exactly the same amount as it had agreed with OVL.

ExxonMobil and Shell have been seeking bigger stakes in the Kashagan oilfield and operating control before starting to expand the project.

KazMunayGas, Kazakhstan's national oil company, too may be interested in the state. Also, Kazakhstan has right to deny approval of the deal.

Sarraf, who broke in September the over-two-year-long hiatus with a deal to buy US energy firm Hess Corp's stake in an Azerbaijan oilfield for $1 billion, said the Kazakhstan government has six months to approve the deal after the expiry of a 60-day period for partners to exercise their pre-emption rights.

"We are confident of getting our government approval within the 240 days timelimit for approval of the entire transaction," he said.

He said Kashagan holds 33 billion barrels of inplace oil reserves, of which about 10 billion are potentially recoverable. "Of this, OVL's share will be 842 million barrels."