OVL sets aside $3 bn for 5% stake in Rosneft

ONGC Videsh Ltd (OVL) is willing to bid for a 5 per cent stake in the Rosneft initial public offering at $3 billion, in return for a strategic stake in development fields in Russia. OVL is the overseas arm of the Oil and Natural Gas Corporation.

"Discussions are on and we will be able to invest up to $3 billion in return for a strategic stake in some oil and gas properties in Russia," MS Srinivasan, Petroleum and Natural Gas secretary said at the sidelines of a conference on future plans of ONGC and LN Mittal in oil and gas exploration and the production sector.

Rosneft, Russia's state-owned oil producer, has come up with an Initial Public Offering equivalent to a 14.3 per cent stake in the group. The IPO would be open to foreign investors and institutional investors in the first week of July.

Rosneft plans to mop up $11.6 billion through the offering. In addition, ONGC will be scouting for oil and gas assets abroad along with Mittal Steel.

LN Mittal, chairman of Mittal Steel and a board member of the joint venture between OVL and Mittal Steel (ONGC Mittal Energy Ltd), said in the very first year of the new company's existence, OMEL had won two blocks in Nigeria for a signature bonus of $105 million.

Mittal said OMEL would now look at expanding its presence in exploration and production activities in as many as 21 countries.

"We would like to fully participate in improving energy security in India. Other public sector units in India should also take a cue from our success to expand their presence globally," Mittal said.

OVL Managing Director RS Butola said the ONGC-Mittal combine was eyeing properties in Kazakhistan, Latin America, Colombia and Africa.

With respect to the Nigerian blocks won recently, OMEL in return will have to ensure an investment of $6 billion in Nigeria for 2,000 Mw coal and/or gas-based power plants, railway systems and capacity building.

This was one of the conditions on which OMEL was allowed to participate in the mini-bidding round that happened earlier this year. OMEL and Nigeria signed a memorandum of understanding to this effect last year.

According to that agreement, OMEL may also build an export-oriented refinery of 180,000 barrels/day capacity based on Nigerian crude, subject to technical and financial viability.