ONGC Videsh Agrees to Buy Stake in Kazakh Field

ONGC Videsh has agreed to acquire 8.40% interest from ConocoPhillips in the North Caspian Sea Production Sharing Agreement (NCS PSA) that includes the Kashagan Field, in Kazakhstan. The acquisition is expected to close in the first half of 2013. 

The Kashagan Field, located in the shallow waters of the Kazakh North Caspian Sea, is the world's largest current development project. Kashagan’s consortium partners are Eni, Total, Shell, ExxonMobil and KazMunaiGaz each with 16.81% stake, while ConocoPhillips has 8.40% and Inpex has 7.56%. 

The acquisition would mark ONGC Videsh’s entry into the largest oil proven North Caspian Sea of Kazakhstan. From Phase 1, the acquisition is likely to add an average annual production of about 1.0MMT for a period of over 25 years with a peak of about 1.6 MMT. When Phase 2 and 3 are implemented, the OVL’s share will be significantly higher.

Forbes in a report has pointed that Conoco may be getting out of the field as it had little say in the development of the gigantic field.

“Over the past 12 years this consortium has plowed nearly $50 billion into bringing the first, 12 billion barrel, phase of Kashagan online. That is a mammoth investment for what will initially be “only” 400,000 bpd of production,” the magazine said.

The report also added that the consortium has weathered years of delays and numerous rounds of infighting. In 2007 the Kazakh government shut down the project, angry over billions of cost overruns and threatening to force Italy‘s Eni to step aside as operator.

“The ambitions of ONGC-Videsh in Kashagan may yet be blocked. The other consortium partners have the right of first refusal for Conoco’s stake. Kazakh officials have reportedly said they are interested in adding to their piece, but don’t have ready access to enough cash. As for the other partners putting in a bid? Who knows, but it’s hard to see the point in having the biggest gun in a circular firing squad,” Forbes said.