Oil & Natural Gas Declines to Comment on Imperial Bid

By Archana Chaudhary

Aug. 21 (Bloomberg) -- Oil & Natural Gas Corp., India's biggest exploration company, declined to comment on reports that its overseas unit has bid to buy a controlling stake in the U.K.'s Imperial Energy Plc.

ONGC Videsh Ltd. offered to pay 1,290 pence a share for Imperial Energy and may increase it to 1,500 pence if China Petroleum & Chemical Corp. also bids, the Business Standard reported today, citing an investment banker it didn't name.

``There needs to be clarity on whether the valuation figures floating in the media are real,'' said Ballabh Modani, Mumbai- based analyst at Enam Securities Pvt. ``Oil & Natural has around $3 billion cash in hand if it needs to fund this deal. This won't be the first time or the last time that China and India are competing for an energy asset.''

Chinese companies have outbid Indian rivals as the world's two most populous nations compete for energy assets in Nigeria, Kazakhstan and Canada. India, the second-fastest growing major economy after China, hasn't been able to increase production at home, where output from three-decade-old fields is declining.

ONGC Videsh made a $2.5 billion, ``non-binding offer'' for a stake in Imperial Energy, the Hindustan Times reported today, citing unidentified officials familiar with the bid. The unit submitted the offer on June 24, it said.

``I cannot comment on this,'' R.S. Sharma, chairman of state-controlled Oil & Natural, said by telephone from New Delhi.

Oil & Natural Shares

Oil & Natural Gas shares fell 30.5 rupees, or 2.9 percent, to 1,005.2 rupees at 11:29 a.m. in Mumbai trading. Imperial Energy shares rose 25 pence, or 2.2 percent, to close at 1,146 pence a share in London yesterday.

Oil & Natural, China Petroleum and Korea National Oil Corp. are interested in acquiring Imperial Energy, Reuters reported on Aug. 13. ONGC Videsh's offer was approved by a committee of senior government officials, the Standard report said today.

``This is speculation,'' said R.S. Pandey, the top bureaucrat in the oil ministry. ``We cannot comment.''

Imperial Energy has allowed China Petroleum to begin due diligence, London's Financial Times reported on Aug. 4, without citing anyone. Imperial Energy last month said it was in talks on a potential 1,290-pence-a-share cash offer, without identifying the possible bidder.

Russian Reserves

Imperial Energy has 450 million barrels of reserves in Russia and pumped 7,000 barrels a day in the first quarter, it said in April. The company plans to produce 25,000 barrels a day by the end of the year. Production at its Kiev Eganskoye field in Siberia, east of the Ob River, is expected to start in September.

ONGC Videsh has projects in 37 blocks in 15 countries, of which production has started in six blocks, according to the company's Web site. The company was selected to bid as an operator for deepwater blocks in Angola, according to a statement dated July 5. The bids are likely to be invited after Angola elections later this year, ONGC Videsh said.

India is focusing on acquiring energy assets in Angola after failing to secure supplies closer to home. Angola, OPEC's fastest-growing member, has reserves equivalent to 11 years of India's imports.

India estimates demand for oil will rise 62 percent over the next five years to 241 million tons a year, or 4.8 million barrels a day.

ONGC Videsh created a joint venture with Venezuela's state- owned oil company in April to pump 232 million barrels of crude over 25 years. The countries are in talks that could give India a stake in the Carabobo block of Venezuela's Orinoco Belt.

The South Asian nation expects a decision from the Russian authorities on another stake in an exploration area on Sakhalin Island ``soon,'' Indian Oil Minister Murli Deora said in March.

The Indian company may pay $300 million to buy a 23 percent stake in Russia's Sakhalin-3 exploration site in which OAO Rosneft owns 70 percent, the Business Standard reported on May 3.

Oil & Natural owns 20 percent in Russia's Sakhalin-1 offshore project located north of Japan. Exxon Mobil and Japan's Sakhalin Oil and Gas Development Co. each hold 30 percent of the asset. Russia's Rosneft owns 20 percent.

To contact the reporter on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.