OVL mulls new model for foreign acquisitions

Future acquisitions would be financed by giving pre-selling rights to refineries and other international companies

Oil and Natural Gas Corporation Videsh Ltd (OVL) is considering a new model to finance its foreign acquisitions. Soon, the company may fund such acquisitions by giving pre-selling rights of crude oil to refineries and marketing companies. This comes at a time when the government is pushing public sector undertakings to fund foreign acquisitions solely through foreign debt, rather than cash reserves, as this wouldn’t affect the country’s foreign exchange reserves.

When contacted, OVL Director (finance) S P Garg said, “We have many ways to finance our projects, including foreign bonds and bank loans. Taking finance against pre-selling crude oil is one such arrangement we are looking at, in tie-ups with refineries.” He, however, didn’t give the details of the pre-selling arrangement.

Oil and Natural Gas Corporation, OVL’s parent company, has the capacity to borrow $10-15 billion from the markets without affecting its credit ratings. “For tie-ups abroad, we are not averse to the idea of partnering Indian private sector players. As we have lined up huge expansion plans, all kinds of financing options are open,” Garg said.

In 2012-13, OVL produced 7.26 million tonnes of oil and oil equivalent (mtoe) of gas, compared with 8.75 mtoe in 2011-12. The company plans to increase production to 20 mtoe in 2017-18 and 60 mtoe by 2029-30. Foreign production contributes about 15 per cent to ONGC’s output; it is expected to contribute 46 per cent to the output by 2029-30.

Recently, OVL had acquired 10 per cent stake in a Mozambique gas field from Anadarko Petroleum for $2,640 million (about Rs 17,000 crore) in cash. The company has also exercised its pre-emption rights to block a deal by Chinese major Sinochem to acquire the BC-10 block in Brazil for $1.54 billion. In 2006, it had acquired 15 per cent stake in the BC-10 block for about $165 million. It plans to acquire an additional 35 per cent stake in the block, in a tie-up with Royal Dutch Shell.

MAKING WAVES
OVL assets abroad

CIS & FAR EAST

Vietnam: Block 06.1 in Vung Tau, Block 127,Block 128,

— $ 459.92 million
Myanmar: Block- A-1, A-3 of Rakhine Coast in Arakan offshore, Blocks AD-2, AD-3 and AD-9 and participations in Shwe Offshore Pipeline Joint Venture Company (PipeCo-1) and Onshore Pipeline Company (PipeCo-2)   
Russia: Sakhalin-I oil and gas field in Far East offshore and acquired Imperial Energy  in the Tomsk region of Western Siberia. Imperial’s interests currently comprise of nine blocks in the Tomsk region i.e. Block 69, 70-1, 70-2, 70-3, 77, 80, 85-1, 85-2 and 86 with a total licensed area of approximately 13,500 square kilometres with 14 licenses.
Kazakhistan: Has 25 per cent participating interest in Satpayev exploration block at Astana region

WEST ASIA

Iraq: Exploration Block-8 in Western Desert,
Syria: Al Furat fields, Block-XXIV

AFRICA

Libya: Exploration Block NC-189 in in west-central part of the Sirte Basin,  Block 81-1 in Ghadames Basin,Contract Area 43 located in Cyrenaica offshore basin
Nigeria: Block OPL 279, OPL 285 and Block-2 in Nigeria-São Tomé & Principe,
Sudan: Greater Nile Oil Project (GNOP) 1, 2 & 4, Block 5A in Muglad basin and Khartoum-Port Sudan Pipeline Project
South Sudan: Greater Pioneer Operating Company (GPOC), Block 5 A in Muglad basin

LATIN AMERICA

Brazil: Block BC-10 in Campos basin, Blocks BM-SEAL-4 & BM-BAR-1, BM-ES-42 BM-S-73, Block S-74

Colombia: Mansarovar Energy Colombia Limited (MECL), Blocks RC-8, RC-9, RC-10 offshore, Blocks SSJN-7 & CPO-5
Cuba: Block N-25, 26, 27, 28, 29 & N-36, N-34 and N-35 :
Venezuela: San Cristobal Project, Carabobo-1 Project