ONGC Videsh loses $5B bid for ConocoPhillips’ stake in Kashagan oil field

ONGC Videsh Ltd (OVL), the overseas arm of oil & gas exploration major ONGC, proposed $5 billion bid to acquire ConocoPhillips' 8.4 per cent stake in Kashagan oilfield in Kazakhstan has come unstuck. The government of Kazakhstan has pre-empted its bid to pick the stake, as per a stock market disclosure on Wednesday.

Last November, OVL had signed the definitive agreements with ConocoPhillips to buy its stake in the Kashagan for around $5 billion.

“Based on the communication received through ConocoPhillips, the government of Kazakhstan has announced that in accordance with the Republic of Kazakhstan Law (RoK) on Subsurface and Subsurface Use, RoK has exercised its priority right and pre-empted the bid by ONGC Videsh to acquire the 8.4 per cent stake of ConocoPhillips in the North Caspian Sea Production Sharing Agreement,” as per the statement by ONGC.

The bid was not pre-empted by other existing stakeholders in the venture within the stipulated time period that ended in January this year.

According to Kazakh law, the government has a right to buy any oil asset for sale in the country at the price agreed on between any other buyer and seller. By exercising the right, Kazakh government is expected the pick the stake through national oil company KazMunayGaz (KMG).

The Kashagan field, located in the shallow waters of the Kazakh North Caspian Sea, is the world’s largest current development project. Kashagan’s consortium partners includes Eni, Total, Shell, ExxonMobil and KMG having 16.81 per cent participating interest each, while ConocoPhillips has 8.40 per cent and Inpex has 7.56 per cent. With this deal, KMG will hold 25.2 per cent.

Two years ago ONGC lost a bid to buy Exxon Mobil Corp's 25 per cent stake in an Angolan oil field and prior to that in March 2010, it had lost the deal to buy oil Block 1 and 3A in Uganda oilfields.

Last month, Oil India Ltd (OIL), along with ONGC Videsh Ltd signed a definitive agreement to acquire Videocon Industries’ 10 per cent participating interest in Rovuma Area 1 Offshore Block in Mozambique for $2.475 billion.

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