OVL to get 25% stake in Kazakh oil block

ONGC Videsh Ltd (OVL) will acquire a 25% stake in the Satpayev block in the Caspian Sea from KazMunaiGaz JSC, the national oil firm of Kazakhstan, by February, petroleum secretary S Sundareshan said.

OVL is expected to invest $400 million ( Rs. 1,800 crore) in the block.
KazMunaiGaz is the operator in the block, which is spread over 1,582 sq. km and is estimated to have 1.75 billionbarrels of in-place oil reserves.

India’s interest in securing energy assets overseas is driven by its energy security concerns, given that it imports 80% of its annual consumption. Consumption of petroleum products has grown at a compounded annual growth rate of around 4% over the past seven years.

By 2030, the country is expected to import 90% of the fuel it needs.
The deal is in the final stages of discussion, Sundareshan said after the eighth meeting of the India-Kazakhstan inter-governmental commission (IGC) on trade, economic, scientific, technological, industrial and cultural cooperation.

The meeting was held in New Delhi during the visit of Kazakhstan oil and gas minister Sauat Mynbayev.

“Both agreed to expedite the signing of the package of documents on Satpayev block on the transfer of 25% share,” India’s petroleum ministry said in a statement.
The stake was originally awarded to ONGC-Mittal Energy Ltd, a venture of ONGC and Mittal Investments Sarl, a firm owned by the family of steel magnate LN Mittal, but Mittal Investments exited the venture last year.

“India is a very important partner for Kazakhstan. Though there were some issue(s), the agreement contract will be signed by (the) end of February,” said Mynbayev.
In a separate development, India hopes to resolve the vexed issue of diesel deregulation through an empowered group of ministers (eGoM) headed by finance minister Pranab Mukherjee.

Sundareshan said the eGoM will decide on the issue of freeing diesel pricing.
The Congress-led United Progressive Alliance (UPA) government decided to decontrol petrol prices on 25 June, but state-owned oil marketeers such as Indian Oil Corp. Ltd (IOC), Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd still sell diesel at the government-mandated price.

The government expects the cost of selling fuel below cost in the current fiscal year to be around Rs. 65,000 crore.

“It is extremely difficult for the government to pass on the entire burden to the consumers. We will have to go before the empowered group of ministers,” Sundareshan said.

“We were hoping crude prices would soften and there would be reasonable grounds for passing on a small additional burden to the consumer... Unfortunately, crude prices have been consistently going up since June,” he added.

While Prime Minister Manmohan Singh had said the government may free diesel prices as well, the government is in a quandary as that would push up retail prices and the already high inflation rate.

Sundareshan said he expects the eGoM to meet before the proposed stake sales in ONGC and IOC. The government plans to raise Rs. 14,500 crore by selling a 5% stake in ONGC, in which it holds 74.14%. It also aims to sell a 10% stake in IOC to raise around Rs. 20,000 crore. Both share sales are expected by March.

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