In a setback to state-owned Oil and Natural Gas Corp (ONGC) embattled British energy major BP today announced the sale of its Vietnam assets to its Russian unit.
ONGC Videsh, the overseas arm of the state-owned firm, is keen to buy BP's 35 per cent stake in gas producing Block 06.1. OVL currently has 45 per cent interest in the block.
"TNK-BP (the Russian unit of British giant) and BP Plc announced today that they have reached an agreement for TNK-BP to acquire BP's upstream and pipeline assets in Vietnam and Venezuela for an overall price of $1.8 billion," a company statement said.
In Vietnam, TNK-BP will acquire from BP a 35 per cent stake in the upstream offshore gas production Block 06.1 containing the Lan Tay and Lan Do gas condensate fields, a 32.7 per cent stake in the Nam Con Son Pipeline and Terminal, and a 33.3 per cent stake in the Phu My 3 power plant.
Earlier in this month, the UK's embattled energy major BP Plc had said it may not sell its stake in Vietnam gas fields to India's ONGC as it is looking at the possibility of transferring the stake to an affiliate company.
OVL, the overseas investment arm of ONGC, is keen on buying BP's 35 per cent stake in the Nam Con Son gas project in Vietnam.
It had even roped in Vietnam's PetroVietnam for buying BP's stake in two offshore gas fields, a pipeline and power project -- together referred to as Nam Con Son.
Block 06.1, where the Lan Tay and Lan To fields currently produce about 14 million cubic metres of gas per day, was originally allocated to OVL, but due to the foreign exchange crisis of the 1990s, it had to farm-out some of its stake to BP. OVL has a 45 per cent stake in Block 06.1, where the balance 20 per cent is with PetroVietnam.
The Nam Con Son project's upstream part is Block 06.1, located 370 km South-East of Vung Tau on the southern Vietnamese coast. The 955 sq km block holds the Lan Tay and Lan To gas fields.
OVL has so far invested $217 million on the gas fields and has the government approval to invest up to $377.46 million.
The statement today said the acquisitions will be financed entirely through the company's available resources and will not require additional capital from the shareholders of TNK-BP.
A deposit of $1 billion will be made by 29 October, 2010 with final payment upon completion. Subject to government approvals and the fulfillment of other agreed pre-closing conditions, the companies expect the transaction to be completed in the first half of 2011.
According to the terms of the agreements, in Venezuela TNK-BP will acquire from BP a 16.7 per cent equity stake in the PetroMonagas SA extra heavy oil producer, a 40 per cent stake in Petroperija SA which operates the DZO field, and a 26.7 per cent stake in Boqueron SA. These assets are operated as joint ventures with PVDSA and have a combined capacity of 25 thousand barrels of oil equivalent per day.
Lexicon Partners acted as financial advisor to the Board of Directors of TNK-BP Ltd, Credit Suisse acted as financial advisor to TNK-BP management, while Goldman Sachs advised BP.
TNK-BP is Russia's third largest oil company, 50 per cent held by BP and 50 per cent held by the AAR Consortium (Alfa Group, Access Industries, and Renova).
TNK-BP also owns close to 50 per cent of another Russian oil and gas company, Slavneft. TNK-BP accounts for approximately 16 per cent of Russia's production (including its share of Slavneft). SEC proved reserves (life of field basis) were 8.586 billion barrels of oil equivalent as on December 31, 2009.