The Hindu Business Line : Tough negotiations between OVL, Kazakh firm

Tough negotiations are going on between ONGC Videsh Ltd (OVL), the overseas investment arm of Oil and Natural Gas Corp (ONGC), and KazMunaiGaz (KMG), Kazakhstan's national oil and gas firm, on the Indian company's efforts to buy 50 per cent stake in an offshore exploration block Satpayev in the Caspian Sea.

There were reports that KMG was demanding a fee for holding further discussions on the proposed acquisition.

In April 2005, Kazakhstan had asked India to buy 50 per cent stake in one of the two blocks - Satpayev or Makhambet - located in the Kazakh section of the Caspian Sea. OVL has shown interest in the Satpayev block.

Fee demands

Asked about the reports of a fee being demanded, OVL sources said: "These are matters where negotiations are going on. Both sides are talking and have taken tough positions." OVL has already spent a substantial sum in geological studies leading to identification of prospects, the sources said.

OVL was also being asked to pay an additional bonus at the exploration stage.

Indications are that OVL is willing to pay a signature bonus after the participating interest is assigned, but will not pay out any additional bonus at the exploration stage as it is meeting the entire exploration expenditure.

A technical and commercial team of OVL had recently visited Kazakhstan to study the structure of the two blocks owned by KMG.

As Satpayev block, according to the company's analysis, held better potential and was more attractive, OVL was in final stages of its negotiations with KMG, the sources said.