New Delhi: Signalling end of his oil and
gas odyssey, steel magnate Lakshmi Mittal has pulled out of a
project to develop an oil field in Kazakhstan in partnership
with Oil and Natural Gas Corp and is looking to sell his stake
to another company.
Days before the joint venture of ONGC Videsh and Mittal
Investment Sarl was to sign agreement for taking 25 per cent
stake in the Satpayev oilfield in the Caspian Sea, the holding
company of Mittal family decided to pull out of the Kazakhstan
block, sources in know said.
It has also decided to sell 50 per cent stake in Caspian
Investments Resources (CIR), which produces less than
40,000 barrels per day of oil from four fields in Kazakhstan.
Mittal, in April 2009, walked out of an exploration
block ONGC-Mittal Energy Ltd -- one of the two joint ventures
he formed with the state-run firm for a foray into oil and gas
space in 2005, had won in Trinidad and Tobago.
In Mumbai, ONGC Chairman R S Sharma confirmed Mittal's
pullout. OVL had anticipated such a move and had a few months
back sought Cabinet approval to invest all of the USD 400
million in the Satpayev on its own in case Mittal walked out.
Sources said Mittal has had strained ties with ONGC as
the state-run firm look little interest in ONGC-Mittal Energy
Services Ltd - the alliance for energy trading and shipping.
These reflected in Mittal dumped OVL to acquire stakes in oil
firms like CIR and Ophir Energy in regions that were
exclusively reserved for OMEL to operate.
OMESL has since been collapsed in OMEL. OMEL has assets
in Nigeria and Syria and has not bid for any oil property in
long time.
Sources said Mittal, two years back, used the Kazakh
government to muscle its way into the Satpayev oilfield where
OVL was shortlisted for a stake. OVL relented after Kazakh
made it a pre-condition for it to come with Mittal for a 25
per cent stake and subsequently got investment approvals from
the Cabinet.
But, Mittal have since decided to exit all oil and gas
projects in Kazakhstan.
Sources said Mittal is also looking at selling its
interest in CIR, in which it had acquired 50 per cent stake in
April 2007 from Russian oil firm LUKoil for USD 980 million.
CIR acquisition was originally to be done by OMEL but the
India-born billionaire went ahead on his own citing opposition
to OMEL from LUKoil.
Sources said Mittal offered the stake in CIR to OVL,
which declined it, apparently because it thought the company
was a sinking ship with oil production falling and actual
reserves not matching the announced ones.
Mittal is now looking for buyers including those in China
for its stake in CIR. LUKoil, which holds the remaining stake
in CIR, may be a potential buyer.
E-mail sent to Mittal for comments, remained unanswered.
Sharma said Mittal Investment informed of its decision to
pullout of Satpayev a few days back.
"This issue (pullout) does not cause any alarming
situation for us because when the (investment) approval was
taken from the Cabinet, we had posed certain options for this
investment," he said.
OVL had anticipated that Mittal may not continue with
Satpayev and so, a few months back, had sought specific
permission from the Cabinet for going ahead with investing the
entire USD 400 million in the field on its own.
The board of OVL, the overseas arm of ONGC, met on
November 17 and decided to write to the Kazakh government on
Satpayev. Kazakh national oil firm KazMunaiGas will be the
operator of the field, holding remaining 75 per cent stake. An
Exploration and Production Contract is to be signed soon.
The Satpayev block, situated in the Pre-Caspian Basin of
Kazakhstan in Caspian Sea, covers an area of 1,582 sq km.
OMEL, and now OVL, is to pay USD 26 million as signing
amount to the Kazakhstan government for 25 per cent stake in
Satpayev field. Besides, it would also pay USD 80 million as
one-time assignment fee. Over and above these, it has
committed a minimum exploration investment of USD 165 million
and an additional optional exploration expenditure of USD 235
million.
Sharma said there was no conflict between the promoters
and that the decision was taken in mutual understanding. OMEL
will stay invested in a producing field in Syria and two
exploration blocks in Nigeria.
Satpayev is situated in highly prospective region of
North Caspian Sea and in proximity to at least four fields. A
peak output of 287,000 barrels per day is envisaged from the
256 million tons of reserves in the field.
Kazakhstan had initially identified the Satpayev and
Makhambet blocks in the Caspian Sea for giving 50 per cent
stake in one of them to OVL. Later, it reduced the stake on
offer to 25 per cent on condition that OVL teamed up with
Mittal, who has steel plants in that country.
OVL relented and in June 2007 made an attractive
commercial proposal to KazMunaiGas, but in subsequent
negotiations Kazakhstan's state-run firm did not agree on
giving operatorship to OVL during the exploratory and
appraisal stages.
Caspian Investments Resources (CIR) acquisition was
originally to be done by ONGC Mittal Energy Ltd (OMEL), the
equal joint venture of OVL and Mittal Investment, but the
India-born billionaire went ahead on his own citing opposition
to OMEL from LUKoil.
CIR owns Nelson Resources, which LUKoil purchased for USD
two billion in 2005. Nelson carries out oil and gas production
projects in Kazakhstan. CIR has oil production assets in the
Kazakh oilfields of Alibekmola, Kozhasai, Severnye Buzachi,
Karakuduk and Arman. The current production from the fields,
which is stated to have total proven reserves of some 270
million barrels, is less than 40,000 barrels per day and is
falling.
Bureau Report
First Published: Thursday, November 19, 2009, 00:31