Oil and Natural Gas Corporation (ONGC) has lost out on acquisition of Uganda oil fields to China's Cnooc, the latest instance Chinese firms outbidding the state-owned explorer in race for scarce oil properties.
ONGC Videsh, the overseas investment arm of the state- owned firm, was originally interested in acquiring Heritage Oil Plc's 50 per cent share in Block 1 and 3A in the Lake Albert Rift Basin of Uganda, sources in know of the transaction said.
Heritage, however, decided to sell its stake to Eni SpA, Italy's biggest energy producer, for about $1.5 billion.
But the deal couldn't go through as UK's Tullow, which held the remaining stake in the Uganda blocks, exercised its right of pre-emption to block Eni. It matched Eni's $1.5 billion bid and later sought investors to sell the stake.
Sources said Cairn India was interested in the property as the blocks held similar kind of crude oil as the one it had discovered in Rajasthan.
OVL and Cairn teamed up to make an offer to Tullow but Cairn backed out once it saw the Chinese entering the scene.
Cairn was replaced by OIL and IOC and the offered about $2.1 billion. But, they were outbid by China National Offshore Oil Corp (Cnooc), China's biggest offshore oil producer, which offered as much as $2.5 billion for the 50 per cent stake.
Along with Cnooc, French explorer Total SA was the other top bidder and Tullow has now stated that it will sell each one-third stakes in the two blocks and another oil field in Block 2 (where it has a 100 per cent stake), to help fund its USD 5 billion cost of developing the Ugandan fields.
Tullow, which operates in 15 African countries, plans to produce at least 5,000 barrels a day in Uganda in 2012, with output rising to 150,000 barrels a day within five years.
Competition for new resources in Africa is heating up as traditional fields go into decline and nations from Venezuela to Russia curb access to resources.
Over the last six years, Tullow and Heritage have invested over $700 million in the Lake Albert Rift basin.
They drilled 27 wells to discover over 700 million barrels of oil reserves and identify over 1.5 billion barrels of potential yet to be explored.
Sources said Tullow was currently awaiting the Ugandian government approval for its proposed purchase of Heritage Oil's 50 per cent stake in their jointly owned exploration areas 1 and 3A. It already wholly owns exploration field 2.
