Adopt 'no-compete' approach towards oil projs: Deora to Beijing

New Delhi, Aug 31 (PTI) With Indo-China rivalry pushing up price of oil properties overseas, Petroleum Minister Murli Deora has proposed to Beijing a 'no-compete' agreement, while suggesting a collaborative and possibly joint acquisition, approach.

Deora used the sidelines of the Shanghai Cooperation Organization (S.C.O.) Summit in Tajikistan's capital Dushanbe to suggested to Chinese Foreign Minister Yang Jiechi a "collaborative approach for acquiring oil and gas projects so that their costs do not needlessly escalate," officials traveling with the Minister said.

The suggestion came in the wake of a possibility of a price war over ONGC Videsh Ltd's (O.V.L.) 1.42 billion pound takeover bid of UK-listed Imperial Energy that has assets in Tomsk region of the western Siberia in Russia.

China’s Sinopec was initially interested in Imperial
Energy and had made an offer even before it completed due
diligence of the company. But after O.V.L.'s offer was
accepted by Imperial board, Sinopec announced that it was not
considering making a counter offer, putting to rest talks of
an Indian-Chinese contest for control of the company.

Officials said Deora suggested to the Chinese minister
that collaborative approach would ensure keeping the costs at
equitable levels to both the offering and bidding parties.
Yang is believed to have reciprocated the suggestion.

Before that, Deora had met Russian President Dmitry
Medvedev and won Kremlin's support for O.V.L.'s Imperial bid.

O.V.L.'s biggest overseas acquisition so far is
contingent upon approval from Kremlin.

Deora met Medvedev on the sidelines of the Shanghai
Cooperation Organization Summit in Dushanbe and sought his
support of the deal, officials present at the meeting said.

"The Russian President promised to support O.V.L. and
even called his energy advisor to issue instructions," one of
the officials said.

If Kremlin approves, Imperial would be biggest overseas
acquisition for O.V.L., the overseas arm of Oil and Natural
Gas Corp. It had paid USD 1.7 billion to buy a stake in Exxon
Mobil Corp's Sakhalin-I field in Russia and USD785 million for
a stake in the Greater Nile project in Sudan, both in 2003.

The board of Imperial had, earlier this week, recommended
OVL's 1,250 pence a share bid but it has to win approval of
Russian authorities to materialize. The Kremlin may want the
Indian firm to sell part of the Imperial stake to a Russian
state oil group such as Rosneft, which O.V.L. is open doing
so.

Kremlin has during recent years increased its control of
the Russian oil. State-backed firms managed majority stakes in
big, formerly privatized energy assets. In 2006, Sinopec
bought Udmurtneft, a 120,000 barrels per day crude production
unit from BP's Russian unit TNK-BP for about USD3.5 billion
but later sold a 51 percent stake to Rosneft.

Officials said they were hopeful of Russian support for
O.V.L. which must quickly for Sinopec may make a counter bid.

"We have good relations with the Russian government and we
hope we will get clearance soon," O.V.L. Managing Director R S
Butola had stated on Tuesday.

Imperial Energy will give O.V.L., which already has a 20
percent stake in Sakhalin-1 project in Far East Russia, access
to Siberia, an area believed to hold huge hydrocarbon
deposits.

Imperial, a relatively small British oil and gas firm
based in Leeds in UK, has oil producing blocks in Tomsk region
in Russia and Kastanai in north-central Kazakhstan.

The bid values Imperial's 920 million barrels
recoverable oil reserves at around USD2.77 per barrel.

Imperial produced 10,000 barrels of oil equivalent per
day at the end of 2007 but plans to raise this to 25,000 by
the end of 2008 and to 80,000 barrels per day (four million
tons a year) by the end of 2011. PTI