OVL rejects LN Mittal offer to take stake in Kazakh oil company

Financial Chronicle, Delhi,19th July 2010


ONGC Videsh (OVL) has turned down an offer to buy steel tycoon Lakshmi N Mittal�s stake in a Kazakhstan oil company after its request for data on the project did not elicit any response. Mittal�s holding company, Mittal Investments Sarl (MIS), had bought half of Russian LUKoil�s 50 per cent stake in Caspian Investment Resources for $980 million in April 2007.

Two years later, it started looking for an opportunity to sell the shareholding and offered the stake to OVL, the overseas investment arm of government-owned Oil and Natural Gas Corporation (ONGC), two persons familiar with the development said.

�OVL sought certain information on the fields like deposits it had, future production profile and prospects, but did not get a response from MIS,� one of them said. �OVL stopped pursuing the opportunity after that.� Industry sources said OVL may have declined Mittal�s offer because it thought the company was a sinking ship with oil production falling and actual reserves not matching the announced ones. LUKoil, which had a preemptive right to buy the Stake, has also dropped plans to buy MIS�s shareholding. Mittal Investment and LUKoil now hold a 25 per cent stake each in Caspian Investment Resources (CIR), while the rest is with Kazakhstan�s KazMunaiGaz.

Sources said CIR was to be originally acquired by ONGC-Mittal Energy (OMEL), the equal joint venture of OVL and MIS, but the India-born billionaire went ahead on his own, citing opposition to OMEL from Lukoil. He later delayed transferring the assets to OMEL, citing opposition to such a move by the Kazakhstan government.

MIS is now looking at selling its entire holding in CIR and sources said Kazakhstan�s government-owned KazMunaiGaz E&P may be looking to buy Mittal�s stake.

LUKoil had acquired Canada�s Nelson Resources (later renamed the CIR) for $2 billion in 2005. CIR owns stakes in four oil fields in Kazakhstan � Alibekmola and Kozhasai (on an equal basis with KazMunaiGaz), North Buzachi (50 per cent with China�s CNPC) and Arman (50 per cent with Shell) and 100 per cent in the mining project Karakuduk.

The proved and probable hydrocarbon reserves of these deposits are 269.6 million barrels.