ONGC bid might be cleared: Analysts
By agencies   |   Friday, 03 February 2006, 20:30 IST
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NEW DELHI: Despite the cabinet deferring its decision on state-run Oil and Natural Gas Corporation's (ONGC) bid to acquire 90 percent stakes in two offshore Nigerian oil exploration blocks, analysts are expecting the government to clear the deal, even as South Korea's state oil firm has issued a denial saying it had ceded its majority share. ONGC lost out last August in its bid for prime Nigerian deepwater acreage after the Korea National Oil Company (KNOC) pledged massive infrastructure investment in exchange for preferential rights. Now ONGC, which was initially granted a 25 percent stake after KNOC took the majority 65 percent share, is seeking permission from the cabinet to buy a 90 percent stake in exploration blocks 321 and 322, a company official said. A company official said, “We have sought cabinet approval. Our expenditure, including the signature bonus, will be about $1.5 billion.” ONGC’s foreign arm OVL had bid a total $485 million to secure rights to explore for oil in the blocks. Confirming the reports, ONGC’s Chairman Subir Raha said, “The is in front of the government but he declined to give details, citing a confidentiality agreement.” But an official at KNOC said the South Korean state-run oil company still holds a 65 per cent stake in the exploration blocks, denying it had lost its right to the stake. "It's absolutely untrue," said the official. "We already have checked with the Nigerian government and we received a confirmation from them that a notice to ONGC was sent by mistake." The KNOC official added Nigeria had offered to boost ONGC's stake by 5 percentage points to a 30 percent share. Nigerian officials were not immediately available for comment. ONGC, India's largest oil producer, has been looking to acquire oil assets overseas to meet surging demand for the energy-starved India. The ONGC official said the Nigerians had approached the firm again, saying there were differences between their government and KNOC over the commercial terms of the deal. "Now, they are ready to sign this deal with us," he said. According to the rules announced during the licensing, companies that failed to make the entire payment by the December 2005 deadline would be disqualified and the blocks would be offered to the second-highest bidder. "These assets are good. Unlike the previous deal, there should not be any issues regarding the ownership of the blocks as the blocks are government-owned," said an analyst with an international brokerage firm. In December, the cabinet had rejected ONGC's proposal to acquire a big stake in Nigeria's deepwater Akpo oil and gas field for as much as $2 billion, saying the proposal was non-transparent in nature and had extraordinary financial risk. The field was later bought by ONGC's Chinese rival, CNOOC, for $2.3 billion, the latest in a string of overseas asset losses to Chinese and other rivals. India has been eager to sign cooperation pacts with other Asian countries to avoid cut-throat competition in the race to buy oil resources abroad, but the latest conflict highlights the difficulty in making these deals work.

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