OVL to go ahead with the acquisition Imperial Energy

The union cabinet has accorded its approval to ONGC Videsh Ltd, the overseas investment arm of ONGC, India's largest oil explorer, to go ahead with the acquisition of UK-listed Imperial Energy.

The cabinet committee on economic affirs met Tuesday morning to approve the deal. There is no official word on the government's decision as yet. People who are in the know of the deal said that the cabinet clearance was taken so that OVL could meet the Tuesday midnight deadline set by UK authorities.

This would pave the way for OVL to make the open offer to the UK listed shareholders. The $2.1 billion deal will be one of the bigger deals by ONGC in recent times Imperial Energy has oilfields in Russia. OVL had sought to delay making the open offer but the request was rejected by the Takeover panel on Monday.

Analysts say the deal works out to around $2 to $2.5 a barrel for OVL given Imperial's declared reserves of 900 million barrels and will help improve India's energy security. India meets almost 70% of its oil demand through imports.ONGC is being advised by Deutsche Bank. Merrill Lynch is advising Imperial.

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OVL may make ‘firm’ offer to Imperial soon
Imperial Energy has choosen OVL over Sinopec

OVL may make ‘firm’ offer to Imperial soon

ONGC Videsh (OVL) — the foreign arm of government-owned Oil & Natural Gas Corporation (ONGC) — is set to make a ‘firm’ offer to shareholders of the UK-based Imperial Energy within 28 days.On Monday, the Russian Federal Anti-Monopoly Service (FAS) gave OVL a clean chit on anti-monopoly regulations, the other mandatory pre-condition for making a formal offer paving way for the $2.5 bn acquisition.

Imperial, incorporated in 2004, has oil and gas assets principally in the Tomsk region of western Siberia and the Kostanai region in north central Kazakhstan.It has about 920 mn barrels of oil equivalent (boe) independently estimated proven and probable hydrocarbon reserves (2P) and around 3.4 bn boe of independently estimated proven plus probable plus possible hydrocarbon reserves (3P). The company plans to produce 25,000 barrels of oil per day (bopd) by December this year and 35,000 bopd by the end of 2009.

Read more in The Economic Times article.

RIL to sell crude at $5 discount

Reliance Industries (RIL), the country’s largest company by market capitalisation, will sell its Krishna-Godavari (KG) basin oil at a discount of around $5 per barrel to Brent crude oil, the global benchmark.At present, Brent crude oil, which is produced primarily from oil fields in the North Sea near Norway, is trading at around $100-105 per barrel.

The company, which had reported sales of Rs 41,579 crore in the first quarter of the current financial year ended June 2008, may add around $300 million (Rs 1,400 crore) to its turnover in the October-December quarter as it begins sale of the KG oil to Indian refiners.RIL will produce around 35,000 barrels of crude oil per day from the field at peak rate. This is around 5 per cent of the total crude oil produced in India. The company will initially produce around 10,000 barrels per day and increase it to peak rate in a month’s time.

As per the terms of the agreement, the government will earn profit from the sale of oil only after Reliance Industries recovers its $2 billion investment made towards producing the oil.

Read more in The Business Standard article.

Essar Oil to raise $5 bn loan from 4 banks

Oil refiner Essar Oil is close to raising $5 billion in loans underwritten by four banks to fund the expansion of its refinery in western India, three bankers with knowledge of the deal said on Thursday.

Essar will raise $3.5 billion in 12-year, rupee-denominated loans underwritten by top lender State Bank of India, ICICI Bank and IDBI Bank, the bankers said.

It will also raise $1.5 billion in foreign currency loan from Standard Chartered and ICICI Bank, they said. "A couple of us have already signed the underwriters agreement. The other two will do it soon," said one banker, who declined to be identified because he was not authorised to speak to the media.

Essar is spending $6 billion to expand its 210,000 barrels a day refinery in western Gujarat state to 1 million barrels a day within three years. The bankers said the company's founders would bring in about $2 billion in equity for the expansion and working capital.

Reliance abandons stake transfer of gas-rich D-6 block

Reliance Industries Ltd has abandoned a plan to transfer an 80 percent stake in a deepwater block to its subsidiaries as it has raised the money it needs for the block, the company said in a statement today.

Reliance, which owns 90 percent in the gas-rich D-6 block in the Krishna Godavari basin off east coast, said last week it had sent a proposal for the transfer of the stake to four fully-owned subsidiaries and was awaiting government approval.There were no details of the amount of funding it had raised.

Canada's Niko Resources owns the remainder in the D-6 block where huge gas discoveries have been made.Reliance aims to pump gas from D-6 from October and oil from September.

Imperial Energy has choosen OVL over Sinopec

UK-listed Imperial Energy today said it has chosen ONGC Videsh Ltd over Chinese competitor Sinopec to discuss a possible sale to the Indian company and an announcement is likely shortly. OVL, through its wholly owned subsidiary Jarpeno Ltd, has made a 12.50 pounds per share takeover offer.

OVL, the overseas investment arm of state-run Oil and Natural Gas Corp (ONGC), had made a takeover offer last month and earlier this month China Petroleum and Chemical Corp (Sinopec) made a counter offer.Imperial, a relatively small British oil and gas company based in Leeds in UK, has oil producing blocks in Tomsk region of western Siberia in Russia and Kastanai in north-central Kazakhstan.It produced about 10,000 barrels of oil per day in December 2007 and is targeting to raise this amount to 80,000 barrels per day (4 million tons a year) by year-end 2011.

Read more in The Economic Times article.

RPL to start production ahead of schedule

Reliance Petroleum Limited (RPL) on Tuesday said it would commission its refinery ahead of schedule. The company said nearly 94 per cent of the project has been completed.

RPL had raised Rs 8,100 crore from the primary market to part-finance the refinery with an annual capacity of 27 mmtpa (million metric tonnes per annum). The most of the remaining fund was borrowed while Chevron chipped in fund against its acquisition of a 5 per cent stake in the company.

Till June 30, the company has invested Rs 25,515 crore in the refinery. This is higher than the projected investment of Rs 24,125 crore as the company made an advance payment to the contractors in order to ensure speedy implementation of the project, the company informed the stock exchanges.

No fresh oil bonds, but no fuel price rise: Deora

Petroleum and Natural Gas Minister Murli Deora on Tuesday indicated there will be no hike in petro products prices for now, though the finance ministry had rejected his demand to issue fresh oil bonds to counteract the losses of state oil companies due to global rising oil prices.

Deora met Finance Minister P. Chidambaram to seek issue of oil bonds worth Rs.440 billion, amounting to 57.1 percent of the Rs.770 billion losses incurred by the state-run oil marketing companies during 2007-08.

“They are not ready for it. So, we have requested the finance minister to issue as much as possible,” Deora told reporters.

Queried if this will lead to the rise in domestic prices, Deora said the matter did not come up in the talks. He pointed out that the decision will have to be taken by the union cabinet.The central government currently issues bonds for 42.7 percent of the oil firms' losses, with another 33 percent coming from upstream oil companies.

Great Offshore to buy SeaDragon for $1.4 bn

Great Offshore is set to acquire Cayman Islands-based SeaDragon Offshore for $1.4 billion. The acquisition will help the company to make ultra deep water discoveries.
Great Offshore faced tough competition from other firms such as Mercator and Essar to buy SeaDragon. The market turmoil has delayed the deal further. SeaDragon would give Great Offshore access to rigs that could be deployed for ultra deep water discoveries.

SeaDragon makes two such rigs and it would take two years to complete them. Globally, there is a greater demand for rigs because of an increase in exploration activities. ONGC too plans to foray into ultra deep water discovery and is actively looking for a buyout.

RIL, Essar Oil eye ONGC`s `unviable` Kakinada refinery

After the UK-based Hinduja group, Oil and Natural Gas Corporation's (ONGC) proposed Rs 26,500-crore refinery at Kakinada, Andhra Pradesh, has found new suitors in Reliance Industries (RIL) and Essar Oil.This is despite ONGC maintaining its stand that the refinery is not financially feasible unless the Andhra Pradesh government gives it more incentives.

The 15-million-tonne-per-annum refinery will be implemented by Kakinada Refinery and Petrochemicals (KRPL). While ONGC's subsidiary Mangalore Refinery and Petrochemicals (MRPL) holds 26 per cent stake in KRPL, IL&FS holds 51 per cent and the remaining stake is held by the Andhra Pradesh government.

Read more in The Business Standard article.

ENI makes open offer for 20 per cent in Hindustan Oil

Italian energy group ENI has made an open offer to buy up to 20 percent in India's Hindustan Oil Exploration Co Ltd for 3.77 billion rupees ($94 million).The offer, made by ENI UK Holdings Plc, a wholly owned subsidiary, is required by Indian law following ENI's acquisition of Britain's Burren Energy, which gave it an indirect stake of 27.2 percent in the Indian company.

The offer is for 26.12 million shares at Rs 144.2 per share.The offer opens on June 11 and closes on June 30, and is subject to regulatory approvals in India.It is not subject to a minimum level of acceptance. Eni has "adequate resources" to fund the offer. N.M. Rothschild (India) is the manager to the offer

Cairn India to raise $250 mn loan from IFC

Cairn India has approached International Finance Corp for a $250 million loan for development of its oil and gas block in Rajasthan, and to build a 600 km crude oil pipeline, documents disclosed by World Bank’s lending arm showed.

The IFC board is likely to approve the loan by May end. “The new financing is to replace an existing facility that was limited to finance the upstream development,” the IFC report said.

Oil India to go ahead with initial offering

Oil India (OIL), the country’s second largest government-owned exploration and production company, plans to go ahead with its initial share sale to the public despite the stock markets falling more than 29 per cent from its peak in January. However, the issue, earlier scheduled for February, is likely to be delayed by a few months.

There were speculations that OIL’s share sale may be put off “indefinitely” as the government is not keen that the company enter a weak market.Rubbishing speculations that the share sale has been put off indefinitely due to market volatility, OIL Chairman and Managing Director MR Pasrija said, “Our fundamentals are strong and the demand for petroleum will remain high,” adding that the high crude oil prices would mean the bottomline would remain strong.

OIL had planned to offer 10 per cent of its shares to the public in February to raise around Rs 2,000 crore.But this sale didn’t happen as the company is yet to meet the Clause 49 norms, which makes it mandatory for a listed company with an executive chairman to have half of its board made up of independent directors.

Pasrija did not give a timeframe for the public offer as the company is awaiting government clearance.

The government also plans to sell 10 per cent of its equity in OIL to Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation to raise another Rs 2,000 crore.

The company has appointed JM Morgan Stanley, Citigroup and HSBC Securities as the book running lead managers to the issue.

Read more in The Business Standard article.

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10 i-banks compete to manage GSPC’s September public issue

Ten merchant banks have put their hands up to manage Gujarat State Petroleum Corp. Ltd’s (GSPC) fresh proposal for an initial public offering (IPO) in September, with the company now fetching a 50% premium over its valuation in late 2006 when it made its first approach for an issue.

GSPC, which postponed its earlier plans for an IPO, has not yet handed out the mandates, but bankers involved in the said GSPC could raise $1.5 billion (Rs6,045 crore) from its IPO. The quantum of shares on offer will be decided after mandating the bankers.

Citigroup Global Markets India Pvt. Ltd, UBS Securities India Pvt. Ltd, Deutsche Securities (India) Pvt. Ltd, JPMorgan India Pvt. Ltd and DSP Merrill Lynch Ltd are the five foreign investment banks that attended the second round of IPO talks in February.The domestic line-up had SBI Capital Markets Ltd, ICICI Securities Ltd, Enam Securities Pvt. Ltd, Kotak Mahindra Capital Co. Ltd and JM Financial Consultants Pvt. Ltd.

Read more in

The Live Mint article.

Essar unit buys 50% stake in Kenyan refinery

Essar Energy Overseas, a subsidiary of Essar Oil, has entered into an agreement to acquire 50% stake in Kenya Petroleum Refineries (KPRL), a four million metric tonne per annum (MMTPA) refinery, in Mombasa, Kenya.This will be Essar Oil's first international acquisition in the refining sector.The government of Kenya holds the remaining 50% in KPRL. The company has not disclosed financial details of the deal.Essar already has three exploration and production blocks in Madagascar and one in Nigeria.

The Mombasa refinery is planned to be upgraded by adding secondary units at a cost of $400- 450 million. The government of Kenya and Essar Energy Overseas will share the cost of upgrading the refinery.

Essar will acquire the KRPL stake from existing shareholders - The Shell Petroleum Company, Chevron Global Energy Inc and BP Africa. Subject to certain conditions, the acquisition is expected to be completed in early 2008

Carlyle invests $41 mn in Great Offshore

US-based private equity firm Carlyle on Friday said it has invested $41 million in Great Offshore, a city-based service provider engaged in the oil and gas sector.

The investment has come through Carlyle Asia Growth Capital Partners, a $680 million fund."Great Offshore is well poised for a tremendous growth in size and profitability, enabled by a strong management team, a relatively under leveraged balance sheet and a favourable macro environment," Carlyle India Managing Director Shankar Narayanan said.

Carlyle Asia Growth Fund invests in 'high-growth companies' in India, China, Japan and South Korea. It works with ONGC, Reliance, Cairn, British Gas, Shell, British Petroleum, Exxon Mobil and Saudi Aramco in India and the Gulf.