ConocoPhillips Sells Stake in Troubled Kashagan Field to India’s ONGC

on Nov 28, 2012

On 26 November 2012, the US oil and gas company ConocoPhillips (NYSE:COP) announced its intention to sell its stake in the giant Kashagan oilfield in Kazakhstan to India’s largest oil explorer Oil & Natural Gas Corp (NSE:ONGC, BOM:500312). The deal, subject to regulatory approvals as well as to consortium pre-emption rights, could see ONGC owning 8.4 percent in a project which has been plagued by significant delays and cost overruns.

**ONGC to Acquire 8.4 Percent Stake in Kazakhstan’s Kashagan Project**
In a press release, ConocoPhillips noted that it was selling its 8.4 percent interest in the Kashagan field to ONGC Videsh Limited, ONGC’s international arm, for about $5 billion (£3.1 billion), with the transaction expected to close in the first half of 2013. The Kashagan field which is located in the Kazakh sector of the Caspian Sea, is the biggest oil discovery in nearly four decades.

“The sale of this quality asset is an important component of our ongoing strategic asset disposition programme,” commented Don Wallette, ConocoPhillips’ executive vice president in the company press release. “We are pleased that ONGC Videsh recognises the value of this asset.”
**ConocoPhillips’ Partners with Two Months to Pre-empt Stake Sale**

Bloomberg reports that the Kazakh government as well as ConocoPhillips’ partners in the Kashagan field have the right of first refusal on the sale. Kashagan’s consortium partners are the Texas-based Exxon Mobil (NYSE:XOM), Italy’s Eni SpA (BIT:ENI), the French Total (NYSE:TOT), Royal Dutch Shell (LON:RDSA, LON:RDSB, NYSE:RDS.A, NYSE:RDS.B), and the state-run KazMunaiGaz, each with 16.81 percent stake, as well as Japan’s Inpex (TYO:1605) with a 7.56 percent stake.

!m[The Oilfield Project Eight Years Behind Schedule](/uploads/story/921/thumbs/pic1_inline.png)Reuters notes that in October, Lyazzat Kiinov, CEO of KazMunaiGaz, noted that the company would be interested in acquiring the stake in principle, whereas his deputy Daniyar Berlibayev pointed out that much would depend on the cost. “We, as the national company, wouldn’t refuse the idea of increasing our share,” Mr Berlibayev told Reuters. “How we might finance this is another question.” Reuters quotes analysts as saying that both Shell and Exxon were unlikely to exercise their right of first refusal on account of the ongoing problems at the project.

**Kashagan Project Troubles**
The Kashagan oilfield has indeed been plagued by various problems including budget overruns, delays, run-ins with the Kazakh government and technical difficulties. The field is expected to finally start pumping in early 2013, eight years behind schedule.
The FT notes that the Kashagan field problems encapsulate the challenges that non-OPEC production growth has been facing over the past decade and that Kashagan questions the notion that a small group of oil countries or the “Briks” – Brazil, Russia, Iraq and Kazakhstan – can redraw the world’s oil map by boosting their production over the next 20 years.
ONGC, however, seems hopeful despite the Kashagan field setbacks. “The worst for the Kashagan field, including the delays, is behind everyone,” noted D.K. Sarraf, managing director of ONGC Videsh, as quoted by Bloomberg. “The future of this really large field is good. We’re fully prepared to participate in the field, including expansion.” Reuters quotes Mr Sarraf as saying that the company will fund the deal through a mix of loans from ONGC and overseas borrowings.


Invest in commodities like Gold, Wheat, Lithium, Oil & more in minutes with our highest-rated broker, eToro.


eToro offers real assets only, no CFD products. eToro USA LLC and eToro USA Securities Inc.; Investing involves risk, including loss of principal; Not a recommendation.

Visit site

Featured Broker

Looking to invest?

Invest globally in stocks, options, futures, currencies, bonds and funds from a single unified platform, with our highest-rated broker.

Commodity Energy Energy & Power Stock Market