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ONGC-Mittal to part finance Syria acquisition

ONGC Mittal Energy Ltd, will part fund ONGC Videsh Ltd's acquisition of an oilfield in Syria.

india Updated: Feb 10, 2006 17:24 IST

ONGC Mittal Energy Ltd, the high profile joint venture between state-owned Oil and Natural Gas Corp (ONGC) and steel tycoon Lakhsmi Mittal, will part fund ONGC Videsh Ltd's acquisition of an oilfield in Syria.

OVL, the overseas arm of ONGC, and China's CNPCI had jointly bid for the first time to acquire Petro-Canada's interest in Syrian production sharing contracts namely Ash Sham (33.33 per cent), Dier EZ Zor (Old) (37.5 per cent), Dier EZ Annex IV (37.5 per cent) and Gas Utilisation Agreement (36 per cent), covering 36 producing fields in Syria.

"ONGC Mittal Energy was now being roped in for funding of OVL's share," a source familiar with the development said.

As per the deal, Himalaya Energy (Syria) BV, the Amsterdam registered 50:50 joint venture of ONGC and China National Petroleum Company International, was to acquire 100 per cent share of Petro-Canadia's Syria interests.

While the CNPCI equity would come through its subsidiary Fulin Investments SARL, ONGC would directly fund 55 per cent of ONGC Videsh Ltd's share amounting to $156.75 million. The balance 45 per cent amounting to 128.25 million dollars would come from ONGC Mittal.

"For its share, OMEL shall be funded by ONGC and Mittal Steel Group in the ratio of 51:49. The total exposure of the ONGC group would be $222.1575 million" he said.

The Syrian fields produced oil at an average rate of 187,350 barrels per day during the first half of 2005. The remaining recoverable reserve potential of the asset is estimated to be more than 300 million barrels of oil.

Sources said Government of Syria has approved the transaction. Pursuant to the agreement, the transfer of shares of the German subsidiary of Petro-Canada, which holds its intrerest in the Syrian PSCs to the OVL-CNPCI joint venture was completed on January 31 at Zurich, Switzerland.

The purchase is retroactive to July 1, 2005.

ONGC Nile Ganga BV, a fully-owned subsidiary of OVL, would acquire the asset on behalf of ONGC and OMEL, and manage the same at a reasonable fee. ONG BV would issue preference and equity shares to ONGV and OMEL in consideration of the funds provided by them in the ratio of their respective investments, sources said.

ONGC would extend the guarantee for due performance of the PSCs/SPA. OMEL would provide back-to-back guarantee to ONGC in respect of its share. The subsequent operating expenses and capital expenditure requirements would be met by the new joint venture, being the owner of producing fields.

First Published: Feb 10, 2006 17:18 IST