UPDATE 2-India eyes $3 bln investment in Rosneft -official http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2006-07-07T151609Z_01_BOM167363_RTRIDST_0_ENERGY-INDIA-ROSNEFT-UPDATE-2.XML
Fri Jul 7, 2006
(Recasts, adds ONGC investment, details and background)
By Unni Krishnan
NEW DELHI, July 7 (Reuters) - India's state oil firm is considering investing up to $3 billion in Russian oil company Rosneft's initial public offering, a senior oil ministry official said, potentially matching China's contribution.
ONGC Videsh Ltd. (OVL), the overseas arm of state-run Oil and Natural Gas Corp. (ONGC.BO: Quote, Profile, Research), is examining the proposal to invest in Rosneft, and a final decision is yet to be made.
New Delhi's interest in the Russian firm underlines its desire to buy energy reserves and assets abroad to secure supplies for its rapidly expanding economy. ONGC, India's biggest oil producer, has already bought assets in Russia, Vietnam and Sudan.
"We are in discussion. It is up to $3 billion investment through ONGC Videsh Ltd. in Rosneft," Petroleum Secretary M.S. Srinivasan told reporters on Friday.
Rosneft, Russia's most leveraged firm, is planning to raise $11 billion from an initial public offering of between 13 and 19 percent of its stock in London and Moscow on July 14.
Srinivasan did not say whether India's investment would be conditioned on its being granted broader access to reserves in Russia, the world's second-largest oil exporter.
An industry source close to the matter told Reuters earlier this week that a potential $3 billion investment from China National Petroleum Corp., parent of listed PetroChina (0857.HK: Quote, Profile, Research), was contingent on supply deals and better upstream access.
A source close to the IPO said earlier this week that firm strategic bids had so far only come from India and China.
$25 BILLION
If ONGC does bid for a stake in Rosneft, it will join global oil giants BP (BP.L: Quote, Profile, Research), China National Petroleum Corp. and Malaysia's Petronas in showing their support for the Russian company.
ONGC's chairman said the company had allocated $25 billion for acquiring energy assets abroad and was keen on increasing its presence in Kazakhstan, Nigeria and Sudan.
"We still have $25 billion for overseas acquisitions in the next five to 10 years," R.S. Sharma told reporters.
Rosneft has valued itself at $60 billion to $80 billion for the IPO, a premium to Russia's top producer LUKOIL (LKOH.MM: Quote, Profile, Research). Bankers have said the price is too high and that Rosneft will need to bring it down if it wants the IPO to succeed. Rosneft says it is growing faster than any other Russian firm and enjoys full support from the Kremlin. "The market cap of Rosneft will be around $60 billion. Our investment will be roughly for a 5 percent stake," Srinivasan said.
ONGC has a presence in Russia through its investments in Sakhalin-1 oil field, where it has 20 percent stake, and analysts are betting on increased investments by ONGC due to India's traditional ties with Russia.
Rosneft Chief Executive Sergei Bogdanchikov had hinted that Chinese and Indian firms such as CNPC and ONGC were prepared to outbid portfolio investors and buy Rosneft shares even at the current price to strengthen relations with Moscow.
© Reuters 2006. All Rights Reserved.