The Hindu Business Line : ONGC to buy Cairn's stake in 2 oil, gas blocks for $100 m

OIL and Natural Gas Corporation (ONGC) is set to acquire Scottish exploration company Cairn Energy Plc's stake in two oil and gas blocks in Bay of Bengal and Gujarat offshore for around $100 million.

As part of the deal, Cairn will get a 15 per cent stake in ONGC's Ganga Valley block GV-ONN-2000/1 and Cambay basin block CB-ONN-2001/1. At present, ONGC holds 85 per cent stake in the Ganga Valley block, with the rest held by Indian Oil Corporation (IOC). In the case of the Cambay block, it holds 100 per cent.

"We have reached an understanding with Cairn Energy for buying their stake in the two blocks," the ONGC Chairman and Managing Director, Mr Subir Raha, told presspersons here on Monday. The two blocks are the deepwater block KG-DWN-98/2 (90 per cent stake) in the Krishna-Godavari basin and the shallow water block CB-OS/2 off the Gujarat coast (15 per cent).

Plans to sell stake in GAIL: To meet a shortfall in its cash flow requirements next fiscal, ONGC is planning to sell its 4.8 per cent stake in GAIL (India). According to the ONGC Director (Finance), Mr R.S. Sharma, resource mobilisation is required since the annual capital expenditure plans are being revised and increased to Rs 16,000 crore for next fiscal. The modalities of the sale have not been finalised.

ONGC-BPCL tie-up: In another interesting development, ONGC has entered into a co-operation agreement with Bharat Petroleum Corporation Ltd (BPCL), whereby BPCL will be offered oil equity in future exploration ventures while ONGC can take equity in the latter's refineries. This symbiotic relation works both ways. BPCL will be procuring crude oil for its refineries at cost and not market prices.

In return, ONGC can procure products at cost price from the refinery and not the global market prices. In this context, ONGC may acquire a stake in BPCL's upcoming six million tonne Bina refinery. In the upstream business, ONGC will be teaming up with BPCL for future exploration block bids.

ONGC plans to enter the petrochemicals business. A detailed feasibility report has been made to set up a C2-C3 plant at a cost of Rs 560 crore at Dahej. ONGC would be scouting for partners in this business.

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