ONGC Plans to Complete Imperial Purchase by June 2009

By Thomas Kutty Abraham and Archana Chaudhary

Nov. 25 (Bloomberg) -- Oil & Natural Gas Corp., India's biggest explorer, plans to complete the purchase of the U.K.'s Imperial Energy Plc., its biggest acquisition, before June 2009.

There are ``no concerns whatsoever'' about concluding the planned 1.4 billion pound ($2.1 billion) deal for Imperial, which has oil and gas assets in Russia, ONGC Chairman R.S. Sharma said in an interview in New Delhi today.

Sharma has justified the proposed acquisition, saying oil will rebound to $100 a barrel, about twice the current level. Oil prices in New York have fallen 55 percent since ONGC made its offer on Aug. 26. Imperial Energy shares traded 13 percent below the offer of 1,250 pence on investor concern that the bid may fail or be lowered.

``At current oil price levels, this may seem like an expensive deal,'' said Ballabh Modani, Mumbai-based analyst at Enam Securities Pvt. ``But strategically, they've done the right thing, considering their long-term interests.''

ONGC plans to obtain the equivalent of 60 million metric tons of oil, or 1 1/2 times India's crude output, from overseas by 2025. The explorer produces almost 25 percent of the oil used by Asia's third-largest energy consumer and is securing energy assets overseas as production from aging fields at home declines.

The plan to buy Imperial Energy cleared two sets of Russian regulatory conditions in November, approvals for which were needed by June 30, 2009, according to the offer document. The approvals by the Federal Anti-Monopoly Service were for transactions involving companies controlled by a foreign state and takeovers under the competition law.

`Quite Liberal'

The Imperial Energy agreement is the first to get the approvals after Russia passed laws earlier this year potentially limiting foreign access to its natural resources. ONGC Videsh Ltd., the unit of ONGC bidding for Imperial Energy, needs to make a formal bid by Dec. 9.

Russia's approach is ``quite liberal'' and it ``won't make any demand'' on the Indian company buying Imperial Energy, Sergei Shmatko, energy minister, said in New Delhi today.

India said it wants Russia to invest in the South Asian nation's oil and gas projects. The two countries may set up a joint group for cooperating on energy, Shmatko said.

The Asian nation is seeking a stake in Russia's Sakhalin-3 project, Oil Minister Murli Deora said. The explorer paid $1.7 billion to buy a stake in the Sakhalin-I field. ONGC owns 20 percent of Sakhalin-I, Exxon Mobil Corp. owns 30 percent, SODECO of Japan 30 percent and OAO Rosneft 20 percent.

Imperial Energy explores in Siberia and had the equivalent of 920 million barrels of proven and probable oil reserves as of December 2007, according to an audit by DeGolyer and MacNaughton cited on the U.K. company's Web site.

The U.K. company's registered reserves in Russia have increased by 40 percent to more than 600 million barrels of oil equivalent since July 1, the company said on Nov. 19.

To contact the reporters on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net; Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.