(Corrects paragraph 6 to say ONGC is India's fifth-biggest
company by market value, not third)
Nov 26 ConocoPhillips said it plans to
sell its 8.4 percent stake in Kazakhstan's giant Kashagan oil
field to India's Oil and Natural Gas Corp Ltd for
about $5 billion as the Indian company looks to make up for
Kashagan, the world's biggest oilfield discovery since 1968,
holds an estimated 30 billion barrels of oil-in-place, of which
8-12 billion are potentially recoverable. First production from
the field is expected in 2013.
India, the world's fourth-biggest oil importer, buys nearly
80 percent of its oil needs as expanding refining capacity has
outpaced local oil output. State-run ONGC's local oil output has
been almost stagnant for years.
ConocoPhillips said the carrying value of the assets related
to its Kashagan interest was about $5.5 billion as of Sept. 30.
The company said it would take an after-tax impairment of
about $400 million in the fourth quarter to reduce the carrying
value. The deal is expected to close in the first half of 2013.
ONGC, India's fifth-biggest company by market value, has
been investing to maintain output from its old fields and has
capital spending plans of around 340 billion Indian rupees
($6.12 billion) both this year and next. The company is under
pressure from the government to meet rising demand.
The acquisition is the largest ever for ONGC, and marks the
biggest outbound deal from India since mobile phone operator
Bharti Airtel bought mobile phone operations in 15
African countries for $9 billion in 2010 from Kuwait-based
telecoms group Zain.
ONGC Videsh, the arm of ONGC that invests in overseas
assets, said the acquisition would likely add 1 million tonnes
(20,000 barrels per day) to its annual production over 25 years
with the company's share of output significantly higher in later
stages of development. ONGC Videsh's production in the year to
March 31, 2012 was 8.7 million tonnes.
Kazakhstan, home to 3 percent of the world's recoverable oil
reserves and the largest former Soviet oil producer after
Russia, has sought to revise deals struck with foreign energy
companies in the lean post-Soviet years.
ConocoPhillips has been conducting a disposal program to
reduce its non-core overseas assets to reduce debt and increase
its exploration and dividend budgets.
It has already exceeded its target of asset sales worth $20
billion by the end of 2012, including the sale of its stake in
Lukoil, Russia's second-biggest oil producer.
"(The) purchase price of $5 billion is at the high end of our
prior expectation of $4 to $5 billion," analysts at Simmons and
Co wrote in a note to clients.
"This is a positive for ConocoPhillips as it marks important
progress on their asset divestiture program, which is needed to
support the capital program and dividend."
ConocoPhillips shares down slightly at $56.39 in early
The company said it notified government authorities in
Kazakhstan, and its partners in the North Caspian Sea
production-sharing agreement of its intention to sell the stake.
Kazakh Oil and Gas Minister Sauat Mynbayev last month
disclosed ConocoPhillips' plans to sell its stake in the field.
The Kashagan field is jointly controlled by state-run
KazMunaiGas and six international companies, including Eni Spa
ExxonMobil Corp, Royal Dutch Shell Plc
, Total SA and Inpex Corp.
($1 = 55.5850 Indian rupees)
(Reporting by Swetha Gopinath in Bangalore; Editing by Maju