ONGC eyes $20 billion investment with Gazprom
Reuters
Moscow, February 22
Oil and Natural Gas Corp (ONGC) is negotiating with Russia's Gazprom over a string of major oil and gas deals that could see the Indian firm invest up to $20 billion in the next few years, company chairman Subir Raha told Reuters.
Raha said in an interview late on Monday he had met Gazprom head Alexei Miller to discuss the deal, which he said was likely to involve all aspects of the gas business -- production and shipping -- as well as petrochemicals and oil.
"The investment may go up to $20 billion or more for a period of five years or so, and if we reach an agreement we could begin as early as next year," Raha said.
"ONGC Videsh (ONGC's overseas arm) is a cash-rich, zero-debt company. At current oil and gas prices, our cash flow situation is also good," he said. "What we are saying is -- Gazprom has a huge amount of gas and we have the money."
The two companies signed a memorandum on Monday to jointly develop energy projects in India, Russia and other countries. If the $20 billion investment goes ahead, it would be the biggest of any Indian company.
ONGC, along with other Indian and Chinese firms, has been prowling the world for new assets, with plans to spend $2 billion this year on overseas acquisitions.
Having snapped up projects in 10 countries, including Russia's Sakhalin, it is now eyeing other assets in the ex-USSR. Analysts say gas will be of particular interest as the share of gas in India's energy mix will grow to 20 per cent by 2025 from just nine per cent.
Projects are ongoing to boost the country's liquefied natural gas (LNG) import capacity five-fold within 10 years.
Raha said one of the planned projects involved gas production in the Russian far east or Sakhalin, and building LNG facilities on the Pacific coast. Sakhalin is home to Russia's first LNG project, led by Shell, in which neither Gazprom nor ONGC is currently involved.
"This will mean very large investments to develop fields, ship the gas and to export it," Raha said, but declined details.
SELLERS' MARKET FOR ASSETS
Raha declined to comment on the progress of ONGC's purchase of a stake in ex-YUKOS unit Yugansk, or in projects such as Vankor. But he stressed ONGC was keen on equity participation rather than joining any particular projects.
Raha said he was not enthusiastic about a loan-for-oil deal of the kind concluded by China National Petroleum Corp (CNPC), which lent Rosneft $6 billion in return for 48 million tonne of cheap crude by 2010.
"China's problem is it has immediate demand and they needed the oil for their coastal refineries. We do not. We would like long-term security through equity participation," he said.
ONGC will also likely participate in future tenders to develop oil and gas deposits in Eastern Siberia, he added.
The drive overseas has intensified amid energy demand that is rising at more than five per cent a year. India imports 70 per cent of its oil needs but this may rise to 85 per cent over 20 years.
However, Indian and Chinese thirst for new oil assets overseas is helping to drive up prices for stakes. Indian officials say they are aware of the problem and hope in future to consult with Chinese firms before bidding for projects.
"If buyers have an understanding, we can both save some money," Raha said. "But given the fact that availability of properties is less than demand and both countries have strategic compulsions, it will not be too easy.
"We must accept that it is a sellers' market nowadays."
© HT Media Ltd. 2004.