ONGC’s twin track for Rosneft stake

NEW DELHI: ONGC has drawn up a two-pronged strategy to pick up a stake in Russia’s largest oil company Rosneft, which is all set to draw the curtains on its $11.6bn IPO on the global stage. It has readied a plan to pick up a 5% stake amounting to an investment of around $3bn through an additional float of shares, which the oil major is reported to be considering. Media reports suggest that Rosneft may be offering another 400m shares and increase its IPO to $14bn.

The second option is the bilateral route, where ONGC Videsh (OVL) will get a stake in Roseneft through private placements in lieu of a strategic role in some of the oil properties in Russia. Prime Minister Manmohan Singh is slated to visit Moscow shortly and bilateral collaboration in the hydrocarbon sector is expected to be a focus area of discussion. Russia’s emergence as a key player in the global energy market is one of the major drivers of strategic collaboration with Moscow.

Chinese oil companies which have been directly competing with Indian oil companies have already evinced interest in picking up a stake in the IPO. OVL, the overseas investment arm of ONGC has prepared this two-pronged strategy to get a share in the Russian oil pie. The two governments are expected to deliberate on further cooperation between Rosneft and OVL in Vankor, Sakhalin 3, Trebs & Titov and Kurmangazy fields and encourage them to sign definitive agreements, sources said. OVL had initially proposed that Rosneft commit some blocks or participating interest before it could subscribe to the IPO.

“This has been the understanding for most strategic oil investors including Chinese in this IPO,” an official said.The demand from “strategic” investors such as international oil companies has helped push Rosneft’s valuation towards the top of the initial guidance range of $60bn to $80bn.