NEW DELHI, June 17: Nearly two years after Kazakhstan blocked India’s USD 5 billion deal to buy stake in the Kashagan oilfield, ONGC Videsh Ltd has said the offer of an alternative mid-sized Abai oil block in Caspian Sea is not attractive enough.
Kazakhstan had in April last year offered OVL a stake in Abai, which was previously being operated by Norway’s Statoil.
OVL, the overseas arm of state explorer Oil and Natural Gas Corp (ONGC), has after one year of studying the field data found it not attractive enough, highly placed sources said.
OVL was offered 25 per cent interest in the Abai block, which according to Kazakhstan Government estimates has 2.8 billion barrels of oil reserves. However, the Indian firm believes reserves may not that high.
Sources said the company has not yet formally rejected the offer but indicated it’s reluctance to take a stake in the block ahead of the 12th meeting of the India-Kazakhstan Inter-Governmental Commission on Trade, Economic Scientific, Technological, Industrial and Cultural Cooperation here.
Kazakhstan had in July 2013 blocked OVL’s USD 5 billion deal to buy an 8.4 per cent stake in the Kashagan oilfield, the world’s largest oil find in five decades, from US energy giant ConocoPhillips.
Kazakhstan exercised its pre-emption right to first buy the ConocoPhillips’ stake and then sell it off to Chinese firm —- China National Petroleum Corporation (CNPC). In 2005, India had lost a USD 4.18 billion deal to buy PetroKazakhstan to China.
At the time of the offer for Abai was made, it was stated that Kazakhstan realises that they were more than unjust to India and have put all their eggs in one basket i.E. China.
Statoil had in February 2013 given up the Abai offshore block spending about seven years negotiating to start exploration.
Kazakhstan’s state-owned KazMunaiGaz National Co held 75 per cent interest in the block with an estimated 387 million tonnes of resources (2.8 billion barrels). Statoil had 25 per cent interest which had been offered to OVL.
Delays and cost overruns have dogged Kazakhstan’s efforts to expand offshore production of oil and gas. OVL had planned to drill two exploration wells on Satpayev in 2014 and 2015 but delivery of a drill rig has been delayed and will start drilling next month.
“There has been satisfactory progress on this project. We expect exploratory drilling to commence early next month,” Oil Minister Dharmendra Pradhan said at the joint meeting.
OVL Managing Director N K Verma said the company has already invested USD 150 million in Satpayev and will invest a total of USD 400 million in exploration.
OVL bought 25 per cent of Satpayev in 2011. It paid USD 13 million as a signing amount to Kazakhstan. In addition, it will pay USD 80 million as a one-time assignment fee to KazMunaiGas (KMG).
On top of this, OVL had committed a minimum exploration investment of USD 165 million and an additional optional expenditure of USD 235 million to the project.
The Satpayev block, measuring 1,582 sq km, is located in the North Caspian Sea, in water depths of 6-8 m, and has two prospective areas that hold an estimated 256 million tonnes of oil and natural gas resources. It lies near four major discoveries.
OVL estimates a peak output of 287,000 barrels per day from the Satpayev and Satpayev Vostochni (East) structures. OVL said it had in November 2012 finalised definitive agreements for acquisition of ConocoPhillips’ stake in Kashagan offshore oil project in the Caspian Sea.
The deal had received support from all other parters in Kashagan. 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.
The Kashagan field, located in the shallow waters (about 5-8 meters) of the Kazakh North Caspian Sea, is the world’s largest current development project.
The field, which is 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.
India has lost at least USD 12.5 billion of deals to China in the past years. (PTI)
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