Hazarika: Job done

New Delhi, April 16: State- owned ONGC Videsh plans to spend $400 million for the 25 per cent stake in Kazakhstan’s oil and gas assets it secured today after six years of negotiations.

The energy pact to buy a 25 per cent stake in the Satpayev exploration block in the Caspian Sea was signed between ONGC Videsh Ltd (OVL) and Kazakhstan’s national company Kazmunaigas during Prime Minister Manmohan Singh’s trip to the mineral-rich country.

India has been trying to gain a foothold in Kazakhstan oil reserves for a long time and the two countries took more than six years to finalise the agreement.

“The $400 million also includes $13 million as signing fee and $80 million as assignment fee,” ONGC group chairman A.K. Hazarika said.

Besides the signing and assignment fee, officials said ONGC Videsh would fund the entire exploration programme.

The deal marks another success by ONGC in its attempt to buy oil and gas assets overseas to secure energy supplies for the world’s fastest-growing major economy after China.

The state-run company, which has been witnessing a decline in production at its ageing fields in the country, has in the past missed out on several oil and gas asset acquisitions in Africa, especially to cash-rich Chinese companies.

The Satpayev exploration block, located in the Kazakhstan sector of the Caspian Sea, covers an area of 1,482 square kilometres and is at a water depth of 6-8 metres.

It is situated in a highly prospective region of North Caspian Sea and is in close proximity to major discoveries. The block contains two prospective structures, namely Satpayev and Satpayev Vostochni (east) with 256 million tonnes in estimated hydrocarbon resources.

In 2005, ONGC and KazMunaiGaz entered into a memorandum of understanding to jointly explore energy assets in Kazakhstan. OVL will hold 25 per cent stake in Satpayev asset, while KazMunaiGaz will hold 75 per cent.

In 2009, OVL along with Lakshmi Niwas Mittal-promoted Mittal Investments Sarl wanted to invest in Satpayev. However, Mittal pulled out of the venture later in the year. Since then the project was hanging in a limbo.

Kazakhstan is important to world energy markets because it has significant oil and natural gas reserves. According to some estimates it is set to become one of the world’s top 10 oil producers by 2025, and one of the top three non-Opec contributors to production growth.

Oil production in Kazakhstan has increased from 410,000 barrels per day in 1995 to 1.7 million barrels per day in 2010. Sales gas production reached 2.1 billion cubic feet per day in 2010.

The government has been pushing state-run explorers to expedite acquisitions of overseas exploration and producing assets as a possible hedge against fluctuations in global crude oil prices and save on precious foreign exchange. India imports 80 per cent of its crude oil requirements.