India's ONGC Plans $20 Billion of Overseas Acquisitions Through 2020

---

Researched by Industrial Info Resources (Sugar Land, Texas)--India's public sector oil and gas exploration company, Oil & Natural Gas Corporation (BSE:500312) (ONGC) (New Delhi), is looking to invest up to $20 billion to acquire and develop oil and gas resources outside the country. The spend will be phased over a ten-year time frame.

The move comes in the wake of a dormant domestic production, coupled with declining outputs from the few existing resources abroad. ONGC has already invested about $10 billion in resources outside the country, with the single major investment being that of $5 billion in the Sakhalin venture in Russia. The company also owns other hydrocarbon assets in Angola, Brazil, Colombia, Cuba, Kazakhstan, Myanmar, Nigeria, Sudan, Syria, Vietnam and Venezuela. Based on current trends, ONGC is anticipating a slump in production at Sakhalin and in Sudan.

Back home, efforts by ONGC Petro-additions Limited (OPaL), a joint venture formed to set up a petrochemical complex at the Dahej Special Economic Zone in Gujarat, are gaining momentum. OPaL is a joint venture company formed by ONGC and Gujarat State Petroleum Corporation (Gandhinagar, Gujarat) in 2006. GAIL (India) Limited (BSE:532155) (New Delhi) later acquired a 19% stake in the company. According to R.S. Sharma, managing director and chairman of ONGC, the venture is likely to attract investments of about $435 million in downstream units. About a dozen downstream firms have already expressed interest in signing up for the feedstock from the facility, which will have a total output capacity of 1.9 million tons a year. The dual-feed ethylene-cracking unit will have a capacity of 1.1 million tons a year. The product range of the OPaL project includes polyethylene, polypropylene, benzene and butadiene, among other variants.

The company plans to float an initial public offering near the completion of the Dahej venture (by December 2012) to source funds required to see the project through. In addition to the existing stake holders in the venture ONGC (26%), GAIL (19%) and GSPC (5%), Petronet LNG Limited (BSE: 532522) (New Delhi) is likely to enter the project with a share of up to 10%. Financial closure has been achieved for the Dahej project, which is likely to incur a cost of $2.73 billion, with a debt-to-equity ratio of 70:30.

Most of the planned ONGC ventures require a hefty investment as the company is looking to bring in 20 million tons of oil and oil-equivalent gas per year over the next decade, primarily from its ventures abroad. With cash reserves of up to $3 billion, ONGC plans to borrow the funds required for the additional acquisitions.

ONGC Videsh Limited (OVL) (New Delhi), the overseas wing of ONGC, managed to harness about 8.78 million tons of oil and oil-equivalent gas from its resources as of March 2009.

OVL has struck a number of deals in the recent past. A consortium of companies comprising Petroliam Nasional Berhad (Kuala Lumpur, Malaysia), Repsol YPF SA (NYSE:REP) (Madrid, Spain), OVL and a few other firms have acquired the development rights to the Venezuelan heavy oil block Carabobo 1. The project, costing $9 billion to $10 billion, will be executed over five years.

OVL has entered into an agreement with Sonangol EP (Luanda, Angola), a state-run firm managing local oil and gas reserves, for joint exploration of oil and gas resources in African countries. As a part of another Indian consortium, OVL will develop liquefaction infrastructure and gas fields in Iran in return for about 6 million tons of liquefied natural gas a year.

ONGC has thus lined up a mix of debt funding and joint ventures to meet its output target from resources abroad. It remains to be seen if the effort bears fruit.

View Project Report - 89000744 89000761 89001067 89001071 89001072 89001074 89001493 89001547

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.