The Telegraph
Thursday , November 22 , 2012
Since 1st March, 1999
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ONGC cash course

New Delhi, Nov. 21: State-run ONGC may float a dollar bond to fund the purchase of a stake from Hess Corp in an oilfield and a pipeline in Azerbaijan.

Under the deal, hammered out in September, US-based Hess Corp will sell a 2.72 per cent stake in the Azeri, Chirag and Guneshli group of oilfields and a 2.36 per cent stake in a linked pipeline running through Georgia to Turkey to ONGC for $1 billion.

ONGC has around $1 billion on its books as reserves. Officials said the oil explorer was mulling a bond issue to raise funds for the purchase.

Officials argue that a forex loan will be cheaper than a domestic one because of lower interest rates, despite the foreign currency risks. They further pointed out that it made sense to let a foreign loan pay for the buyout rather than raising domestic debt which had to be converted.

The stake buy in the BP-operated field has been criticised by analysts as the oilfields have reached peak output.

However, some analysts have said the stake buy is cheap and should prove profitable.

In the deal with Imperial Energy in 2008, ONGC had paid $16 per barrel of oil equivalent (boe). Compared to that, the stake in the Azerbaijan fields will cost about 7.88 per boe. Recent deals by other global energy firms have been struck in the range of $16-$19 per boe.

ONGC had come out with a forex bond issue of $951 million to buy a 100 per cent stake in Imperial Energy, which owns fields in the Tomsk region of Russia, for $2.2 billion.

The bond issue for the Azerbaijan stake buy will have to be cleared by the petroleum ministry as well as by the cabinet committee of economic affairs.