Rosneft, India's OVL Prepare to Close Vankorneft Deal

Rosneft and ONGC Videsh have taken one more step towards finalising the deal under which the latter will buy an additional 11% stake in Vankorneft, a subsidiary of Russian Rosneft, which operates fields in eastern Siberia.

The two parties signed within the BRICS summit an agreement October 15 on the preparation for the completion relating to the sale and purchase agreement, Rosneft said. The document was signed in the presence of the Russian president Vladimir Putin and Indian prime minister Narendra Modi by Rosneft CEO Igor Sechin and OVL managing director Narendra Verma.

The deal was recently green lighted by Indian cabinet. OVL will be paying $930mn for the stake which will provide 3.2mn metric tons of oil equivalent to OVL by 2017. Rosneft and OVL aim to close the deal by the end of October.

After the closing of the deal to purchase an additional 11% stake OVL’s share in Vankorneft will reach 26%. In May, OVL closed the deal to acquire 15% stake for $1.27bn. The Indian government has also approved the deal signed by an Indian consortium comprising Oil India, Indian Oil Corporation and Bharat PetroResources to acquire 23.9% stake in Vankorneft for $2.02bn. Once both the deals are closed, the share of Indian state companies in Vankorneft will increase to 49.9%.

Additionaly within the BRICS summit Rosneft and an expanded consortium, comprising five Indian state companies (Oil India Limited, Indian Oil Corporation, Bharat PetroResources Limited, ONGC Videsh Limited and Hindustan Petroleum Corporation Limited) announced to extend the cooperation within the joint implementation of oil and gas projects in Russia. The parties aim to negotiate for the possible acquisition of shares in the Suzun, Tagul and Lodochnoe fields, viewing them as a single asset, Rosneft said.

Rosneft subsidiary Vankorneft was established in 2004 to develop Vankor oil and gas condensate field - the largest of the fields, discovered and commissioned in Russia during the last twenty five years. As of Januray 1, 2016, Vankor field 2P reserves by PRMS classification are 265mn tons of oil and condensate and 88bn m³ of gas.

With US and EU sanctions in place, Moscow is looking to expand energy exports in fast growing Asian economies such as China and India, but also with Indonesia. Rosneft and Indonesian state Pertamina agreed in May 2016 a co-operation deal that may lead to a Russian investment in a refinery in eastern Java; and to Pertamina becoming an equity holder in some of Rosneft's upstream interests in Russia.

Shardul Sharma