Body of oil PSUs buys 24% stake in Russian oilfield

A consortium of Indian state-owned oil firms, including Oil India (OIL), Indian Oil Corp (IOC) and Bharat Petro Resources (BPRL), has signed a final sale-purchase agreement (SPA) with Russia’s national oil company Rosneft to acquire 23.9 per cent stake in its subsidiary, JSC Vankorneft, that operates the Vankor oil field in East Siberia.

This follows the signing of a heads of agreement, that comes between an initial memorandum of understanding and a final SPA, between the two parties in March this year for the deal.  ONGC Videsh, the foreign arm of Oil and Natural Gas Corporation had in September 2015 bought 15 per cent stake in Vankor for $1.27 billion. Based on the valuation in that deal, the consortium will pay around $2 billion for the stake.

“The acquisition is subject to relevant board, government and regulatory approvals and is expected to close by September 2016,” IOC, the nation’s largest fuel retailer, stated, without disclosing the value of the deal.

The agreement was signed today during the St. Petersburg International Economic Forum (SPIEF) held in St. Petersburg in the presence of oil minister Dharmendra Pradhan and Russian energy minister Alexander Novak. The deal was signed by IOC Chairman B Ashok, OIL Director Biswajit Roy and BRPL Managing Director D Rajkumar with Igor Sechin, Chairman of the Management Board at Rosneft.

Rosneft Oil Company holds 85 per cent shares while OVL holds 15 per cent shares in JSC Vankorneft. Vankor is Russia’s second-largest field by production and accounts for around 4per cent of Russian production. The field, largest discovered and commissioned in Russia in 25 years, currently produces around 422,000 barrels of oil per day.  Vankor had recoverable resources of 361 MT of oil and condensate and 138 bcm of gas as on 1 January 2016.

With the closure of the Vankor deal, IndianOil's equity oil portfolio will go up by 1.6 million tonne per annum. “The agreement will further strengthen the long-standing relationship between Indian PSUs and Rosneft, paving the way for an enriching journey together. The acquisitions also have significant strategic importance to India, both in terms of augmenting India’s energy security as well as enhancing India’s stature in the global political and economic arenas,” Pradhan said.

Commenting on the development, Sechin said the agreements are aimed at creating an unprecedented Russian-Indian corporate entity. “It is worth noting that the signed complex documents were structured within a very tight schedule, which demonstrates the commitment of the parties. The vertically integrated model to be created based on a leading upstream asset in Russia marks a new page in the energy dialogue between Russia and India,” he said.

The consortium of OIL, IOC and BRPL had in March signed another SPA with Rosneft for acquiring 29.9 per cent stake in Rosneft-operated Taas Yuryakh oil fileld for $1.28 billion. That deal had valued the oil field at $4.2 billion and is expected to be concluded in September this year. The Taas-Yuryakh field is rich in gas with presence of layers of oil. Its current crude oil production hovers around 20,000 barrels of oil per day (bopd). The management is working on a target to raise production to 100,000 bopd in around two years.

Also, OVL had in March signed an MoU with Rosneft to raise its stake in Vankor oilfield to 26 per cent. OVL will pay around $930 million for the deal.  New Delhi's interest in increasing economic cooperation with the Kremlin is seen as an extension of several rounds of talks between Prime Minister Narendra Modi and Russian President Vladimir Putin in New Delhi and abroad.