OVL pulls out of EnCana

ONGC Videsh Ltd withdrew from the race for acquiring Canadian oil firm EnCana Corp's Ecuador assets, allowing a Chinese consortium to take over the interests for $1.42-billion.

OVL, the international arm of state-owned Oil and Natural Gas Corp, had bid $1.4-billion for EnCana's 75,000 barrels per day of oil producing properties and a pipeline but with a condition that the Calgary-based firm would guarantee immunity against any troubles with the Ecuador government, industry sources said.

EnCana had acquired 40 per cent interest in Block 15, part of the assets the Canadian firm had put on sale, from Occidental of the US but the deal had no prior approval of the Ecuador government. Ecuador threatened to cancel the licence for Block 15 and OVL had insisted that EnCana covers such a risk.

"EnCana could not guarantee such an immunity leading to OVL withdrawing from the race," a source said.

The assets went to Andes Petroleum Co, a joint venture of Chinese petroleum companies, yesterday evening.

"EnCana was keen on a deal with OVL all the while. Andes Petroleum Co, which did not insist on any conditions like the one imposed by OVL, stepped in only after the Indian firm withdrew from the race," the source said.

OVL could have got EnCana's Ecuador asset even after the Chinese firm bid $20 million more than its previous bid but was prevented from proceeding any further by the condition imposed by the Indian government that it should cover its risks in Block 15 for any acquisition.