India clinches stake in Russian oilfields

In a deal worth $1.3 billion, Indian consortium buys 29.9% stake in Taas-Yuryakh oilfield in East Siberia

Indian firms on Wednesday clinched a slew of deals worth around $4 billion with long-time strategic partner Russia for purchasing stakes in two key East Siberian oilfields operated by Rosneft, the world's largest publicly-traded oil company. The move is expected to bolster India's energy security amid subdued global oil prices.

As part of the deal, a consortium of three public sector undertakings (PSUs) - Oil India (OIL), Indian Oil Corp (IOC) and Bharat Petroleum Resources (BPRL) - will pay $1.28 billion (Rs 8,618 crore) for a 29.9 per cent stake in Rosneft-operated Taas-Yuryakh oilfield based on a share purchase agreement (SPA) signed on Wednesday. The deal values the oilfield at $4.2 billion (Rs 28,280 crore) and is expected to be closed by September.

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"The deal parameters will be reported to the market later. These transactions provide Indian companies access to production on Russian territory, and Rosneft is gaining access to the opportunity to operate in the Indian market. Therefore, we are establishing a reliable energy bridge between our countries," Rosneft Chief Executive Igor Sechin told reporters on the sidelines of the signing ceremony, following a meeting with Petroleum Minister Dharmendra Pradhan.

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. The field houses 137 million tonne of liquid hydrocarbon and 181 billion cubic metre (bcm) of gas. "As a result of this deal, we will get the rights over 30 per cent of the current production. The deal also stipulates around $180 million capital expenditure by the consortium in the oilfield," said a senior executive close to the development.

The Indian consortium also signed a Heads of Agreement (HoA), which comes between an initial memorandum of understanding (MoU) and a final SPA, for acquiring 23.9 per cent stake in Vankorneft, the Rosneft subsidiary that operates the Vankor oilfield in East Siberia. ONGC Videsh (OVL), the overseas arm of Oil and Natural Gas Corporation (ONGC) had last September bought a 15 per cent stake in Vankor field for $1.27 billion. Based on the valuation in that deal, the consortium will pay around $2 billion (Rs 13,466 crore) for the stake.

As part of the deals clinched, OVL also signed a MoU with Rosneft to raise its stake in the Vankor oilfield to 26 per cent. OVL will pay around $930 million (Rs 6,261 crore) for the additional stake, officials said.

"We have been given the target of closing this deal by June 16. It is a tall target as we will have to do a lot of due-diligence again. A lot has changed in terms of global oil prices since we last studied the valuations," a senior OVL official told Business Standard. The consortium also signed an MoU on Wednesday with Rosneft for acquisition of a cluster of satellite fields surrounding Vankor. Officials said details of reserves in the fields were yet to be established. 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.

OTHER DEALS ANNOUNCED ON WEDNESDAY

Heads of Agreement between the consortium and Rosneft for 23.9 % in Vankorneft (valued at $2 bn)

MoU between OVL and Rosneft to acquire additional 11% in Vankorneft (valued at $900 mn)

MoU between consortium and Rosneft for acquisition of Vankor cluster fields