India blocks ONGC's plan for investing in Nigerian oil fields

Dec 16, 2005 01:00 AM

India's government blocked plans by state-owned Oil & Natural Gas Corp. (ONGC) to invest $ 2 bn in a Nigerian oil field, forcing the company to seek energy assets elsewhere to feed demand in Asia's fourth-largest economy.
ONGC wanted to buy a stake in the Akpo deepwater oil project from South Atlantic Petroleum, two people involved in the transaction said on Nov. 30. China's state-owned CNOOC Ltd. also submitted a bid, they said.

India lags China in acquiring oil and gas assets as the world's two fastest-growing major economies seek the energy supplies to support future expansion. ONGC lost out to Chinese companies that agreed to pay $ 5.6 bn for assets in Kazakhstan and Ecuador, in part because of price.
It makes sense for India's government “not to approve an investment after foreseeing the risks involved,'' said K.K. Mital, who manages 2 bn rupees ($ 44 mm) of stocks at Escorts Asset Management in New Delhi. “The government would like to ensure the safety of its investments.''

South Atlantic is owned by Theophilus Danjuma, who was previously Nigeria's defence minister and a former army chief. India's Cabinet, at the same meeting approved a separate plan by Oil & Natural Gas to spend as much as $ 820 mm to buy ExxonMobil's unit in Brazil.
Approval is granted “in the event of it being a successful bidder,'' a government statement said. ONGC may buy the unit for $ 330 mm and invest another $ 490 mm.

India needs to acquire energy businesses overseas to raise output, which is stagnating as its domestic fields age. After losing out on the two bids to China, India tied up with China National Petroleum Corp. (CNPC) to bid for Petro-Canada's 38 % stake in Syria's Al Furat Petroleum.
Calgary-based Petro-Canada may approve the joint bid, Syrian Petroleum Minister Ibrahim Haddad said on Dec. 13 in Kuwait City. CNPC in September outbid ONGC in buying assets of EnCana in Ecuador for $ 1.42 bn. In August, the Chinese company beat India by agreeing to pay $ 4.18 bn for PetroKazakhstan.

The Akpo field, about 200 km (124 miles) off the coast of Port Harcourt, will pump 225,000 bpd after 2008, equal to 9 % of Nigeria's current production.
Total, based in Paris, holds 24 % of the field and Brazil's Petroleo Brasileiro owns 16 %. The rest is held by South Atlantic and state-owned Nigeria National Petroleum Corp.

Source: Bloomberg
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