ONGC Videsh raises $1 bn to finance Russian oil field deal

State-run ONGC Videsh Ltd (OVL) raised $1 billion from the international market to refinance its acquisition of a 15% equity stake in Russia’s JSC Vankorneft.

In a deal facilitated by the Indian and the Russian governments, OVL, the overseas arm of Oil and Natural Gas Corp. Ltd, had announced its plan to acquire the stake from Rosneft Oil Co. in 2015 for $1.27 billion. In addition, OVL also plans to acquire another 11% stake in Russia’s second-largest field by production.

“ONGC Videsh Vankorneft Pte Ltd, an indirect wholly owned subsidiary of ONGC Videsh Ltd, which itself is a direct wholly owned subsidiary of Oil and Natural Gas Corp. Ltd announced that it has priced on 19 July 2016 $1 billion notes comprising of $400 million senior unsecured notes due 2022 and $600 million senior unsecured notes due 2026 in the international capital markets. The notes are guaranteed by ONGC,” ONGC said in a statement.

Vankor accounts for 4% of Russia’s crude oil production. ONGC produced 57.38 million tonne (MT) of oil and oil-equivalent gas (mmtoe) in 2015-16. The company entrusted with India’s energy security goals has oil and gas reserves of 2,022 mmtoe. OVL has 37 projects in 17 countries.

“The notes saw a large geographic spread with interested investors from Asia, Europe and offshore US accounts. The investors’ bases are fund managers, banks, private banks and sovereign wealth funds/insurance companies,” added the statement.

India imports one-third of its energy requirements. The country imported 202.85MT of crude oil in 2015-16 for Rs.4.16 trillion, according to provisional data available on the website of Petroleum Planning and Analysis Cell, which works under the ministry of petroleum and natural gas. For 2014-15, India imported 189MT of crude oil at a cost of Rs.6.87 trillion.

“Citigroup and Standard Chartered Bank acted as joint global coordinators and Citigroup, Standard Chartered Bank, DBS Bank Ltd, Mizuho Securities, MUFG (Mitsubishi UFJ Financial Group Inc.) and SMBC Nikko acted as joint book runners and joint lead managers for this issuance,” the statement added.

As per BP Global data, India has emerged as the third-largest consumer of crude oil with a consumption of 4.2 million barrels per day (mbpd) for calendar year 2015, after the US (19.39mbpd) and China (11.96mbpd). India overtook Japan which consumed 4.15mbpd.

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