ONGC Mittal bags Nigerian oil block

ONGC Mittal Energy Ltd, the joint venture company floated by ONGC and Mittal Steel, has won a highly prospective oil block in Nigeria.

The joint venture company bid $100 million for Nigeria's OPL 246, after South Atlantic Petroleum's (Sapetro) licence for the block was revoked, industry sources said.

ONGC Mittal outbid INC Natural Resources and BG-Sahara at an auction held on Wednesday, shortly after Sapetro lost a legal challenge against a government decision to revoke the licence.

OPL 246 is the relinquished area of the billion-barrel Akpo oilfield of Sapetro, which is partly owned by Theophilus Danjuma, former defence minister of Nigeria.

Sources said in January, ONGC lost the bid to acquire Sapetro's 45 per cent stake in Akpo to China's CNOOC, after the Indian government disallowed the state-owned firm from proceeding with the transaction.

ONGC Mittal has to pay 25 per cent of the $100 million signature bonus committed for OPL 246 this week, failing which, it will lose the block to INC, which was designated as the reserved bidder.

An ONGC executive said the company was "studying the prospects" and would shortly take a decision on the issue. It may take an extension on payment of the signature bonus.

In Nigeria, ONGC Mittal had recently secured licences for OPL 209 near ExxonMobil's Erha project and OPL 285, where Statoil earlier struck hydrocarbon. ONGC, however, pulled out of two Nigerian deepwater blocks 323 and 321, following differences with majority stakeholder, Korean National Oil Co.

Sources said under Nigerian rules, oil firms had to relinquish half of their exploration licences when they made a discovery. The smaller discovery area is converted into a production-licensed zone, freeing up unused acreage for others to explore more.

However, South Atlantic had asked a Nigerian court to review the government's decision to revoke the remnant of OPL 246 after the giant Akpo oilfield was discovered.

The Akpo field, about 200 km off the Nigerian coast and operated by French energy giant Total, is expected to produce 225,000 barrels of oil a day when it comes on stream in the second half of 2008.

However, the government insisted Sapetro relinquish the entire block, which was originally set to run through 2008.