India's ONGC has lost the giant Kashagan oilfield to the Chinese after Kazakhstan blocked its $5 billion deal to buy US energy major ConocoPhillips' stake in the Caspian Sea oilfield.
ONGC Videsh, the overseas investment arm of state-owned Oil and Natural Gas Corp (ONGC), had in November last year struck a deal to buy ConocoPhillips' 8.4% stake in Kazakhstan's biggest oilfield, Kashagan for $5 billion.
As per Kazakh law, the Central Asian nation had the right of first refusal or pre-emption rights that allowed it an option to step in and buy the stake at the price agreed between the Indian firm and ConocoPhillips.
The Kazakh government has decided to exercise its ROFR and acquire the stake held by ConocoPhillips, sources with direct knowledge of the development said.
The Central Asian country's Oil and Gas Ministry has informed ConocoPhillips its national oil company KazMunaiGaz will buy the US oil company's 8.4% interest in the world's largest oil find in five decades for about $5 billion. This stake will then be sold to China National Petroleum Corp (CNPC) for a reported $5.3-5.4 billion.
Kashagan, a Caspian Sea field set to produce 370,000 barrels of oil a day, is to start output by September, eight years later than initially planned and with costs nearing $48 billion, double the early estimates.
According to Kazakh law, the government has the right to buy any oil asset for sale in the country at the price agreed on by the buyer and seller.
While ONGC got nod of the partners for acquisition of ConocoPhillips stake at end of January, Kazakh government had time till July to approve the transaction.
Exxon Mobil, Royal Dutch Shell, Italy's Eni, Total of France and KazMunaiGaz each hold 16.8% of Kashagan. Japan's Inpex Corp has 7.56%.
India has lost at least $12.5 billion of deals to China in past years.
CNPC beat India by agreeing to pay $4.18 billion in August 2005 for PetroKazakhstan, then China's biggest overseas oil deal. At that time, oil minister Mani Shankar Aiyar had stated that India's bid for PetroKazakhstan was thwarted as the "goalposts were changed after the game began."
The Chinese firm had trailed ONGC and its partner Lakhsmi N Mittal's $4 billion bid at the close of bidding on August 15, 2005. But post-close of bidding, it was allowed to raise the offer price to $4.18 billion, which saw PetroKazakhstan, a Canadian oil firm operating in Central Asia, go to CNPC.
A month later, CNPC against outbid ONGC in buying assets of Encana Corp in Ecuador for $1.42 billion.
In March 2010, ONGC lost out on acquisition of oil Block 1 and 3A in Uganda oilfields to China's Cnooc who offered as much as $2.5 billion for the 50 per cent stake.
In May 2011, ONGC lost a bid to buy Exxon Mobil Corp's 25 per cent stake in an Angolan oil field. ONGC had offered about $2 billion for the stake in Block 31 off Angola's coast.
Kazakhstan, home to 3% of the world's recoverable oil reserves, has moved in recent years to exert greater management control and secure bigger revenues from foreign-owned oil and gas projects.
Kazmunaigas entered the Kashagan consortium as a shareholder in 2005 and has since then doubled its stake to 16.81%.
Kashagan, with reserves estimated at 35 billion barrels of oil in place, is expected to produce its first oil in September.