ONGC-Mittal to pay USD80 mn for 25 pc stake in Kazakh oilfield

New Delhi, Jan 24 (PTI) Oil and Natural Gas Corp and its
billionaire partner Lakshmi N Mittal will pay USD 80 million
signing bonus for taking a 25 percent stake in Kazakhstan's
prospective Satpayev oil field in the Caspian Sea.

ONGC Mittal Energy Ltd, the joint venture of ONGC Videsh
Ltd and Mittal Investment Sarl, Saturday signed Heads of
Agreement with Kazakhstan's national oil firm KazMunaiGas
(KMG) for the stake, Petroleum Secretary R S Pandey said.

"OMEL will get 25 percent stake in exploration phase and
will have the option of increasing it by 10 per cent upon
commercial discovery," he said.

The 1,582 sq km Satpayev block, situated in the Pre-
Caspian Basin of Kazakhstan, holds 1.75 billion barrels of
inplace oil reserves. It lies in close proximity to major
fields like Karazhanbas, Kalamkas, Kashagan and Donga, where
significant quantum of oil has been discovered.

KazMunaiGas will be the operator of the field and hold
the remaining 75 per cent stake.

OVL Managing Director R S Butola signed the agreement on
behalf of OMEL and for KMG its President Kairgeldi Kabyldin
inked the deal.

The agreement is culmination of nearly four years of
negotiations during which Kazakhstan went back and forth on
giving stake to the Indian company.

Kazakhstan had initially identified the Satpayev and
Makhambet blocks in the Caspian Sea for giving 50 per cent
stake in one of them to OVL, the overseas arm of state-owned
ONGC. Later it reduced the stake on offer to 25 per cent on
condition that the Indian flagship company teamed up with
steel baron Lakshmi N Mittal for entry.

OVL relented and in June 2007 made an attractive
commercial proposal to KazMunaiGas, but in subsequent
negotiations Kazakhstan's state-run firm did not agree on the
percentage of stake OVL would get. It also did not agree on
giving operatorship to OVL during the exploratory and
appraisal stages.

Kazakhstan Saturday finally decided to sign the HoA which
now has to be converted into a Exploration and Production
Contract.

Pandey said the contract is likely to be signed in the
next 3-4 months before the new sub-soil law of Kazakhstan
comes into force. The new law forbids foreign firms from
taking any stake in Kazakh oil and gas field. Instead only
service contracts would be offered with a fixed rate of return
on the investment.

Meanwhile, an ONGC release said the HoA signed today was
in pursuance to the Memorandum of Understanding that was
signed between OVL and KMG in February 2005, for cooperation
in the oil and gas sector of Kazakhstan.

"The two companies are now actively pursuing, together
with the Government of Kazakhstan, for finalisation of the
Exploration and Production Contract for Satpayev," it said.

The Satpayev block, situated in the Pre-Caspian Basin of
Kazakhstan in Caspian Sea, covers an area of 1582 sq km and is
at a water depth of 5-10 meters.

It is situated in a highly prospective region of North
Caspian Sea and is in close proximity to major fields, like
Karazhanbas, Kalamkas, Kashagan and Donga, where significant
quantum of oil has been discovered.