ONGC loses one more Russian oil asset to China

NEW DELHI: China does it again. ONGC Videsh (OVL) has lost out yet again to China in a direct fight over oil assets in Russia.

TNK-BP which controls the OAO Udmurtneft fields in Russia is learnt to have decided to opt for Sinopec of China to OVL for the assets.

Udmurtneft pumps 115,000 barrels a day of oil and holds 551m barrels of proven oil reserves. This is one of the first big ticket oil asset acquisitions by China in Russia.

Officials at OVL said that they were yet to get an official word from BP and the deal was yet to be formally closed. “However, we may get to hear of the final view by late night or tomorrow,” an official said.

In what is coming to be almost a pattern, ONGC Videsh has lost out to Chinese oilcos wherever there has been direct competition.

Over the last one year alone, OVL has lost bids close to $8bn in assets ranging from Kazakhstan to Nigeria and Angola.

While ONGC Mittal Energy lost out after an aggressive bid for PetroKazakhstan, OVL also had to concede to China in the Encanna deal for oil assets in Equador.

While in some cases China simply outbid the India’s, in others China offered special packages to swing the deal.
Sources said that one of the major constrains that OVL faces is with regard to its financial autonomy.

At a time when most global oil companies are bidding aggressively, OVL has to either go through a long process of government clearances or limit its bid. “So while OVL ends up bidding in the region of $200-$350m players are bidding as high as $1,100m for a single asset,” an official said.

Sources in investment banking circles who are in the know of the deal said this was a classic example of how China has managed to beat India by sweetening the deal through diplomatic moves.

“Typically in a country like Russia, its not so much about the bid amount for the deal. In this case too, the bid by OVL would have been close but there are definite signals from the government whom they would prefer,” a source said.