The Cabinet Committee on Economic Affairs has given its approval authorising ONGC Videsh Ltd's (OVL)'s acquisition of participating interests owned by Hess Corporation's wholly-owned subsidiaries in upstream and midstream oil and gas assets in Azerbaijan.

On September 8, 2012, OVL had announced it has signed definitive agreements for acquisition of Hess Corporation's 2.72 per cent participating interest in oil fields (Azeri, Chirag and Guneshli) in the Azerbaijan part of the Caspian Sea and 2.36 per cent interest in the Baku-Tbilisi-Ceyhan Pipeline (BTC) for $1 billion.

The CCEA authorised OVL to incur expenses so as to keep the total exposure up to the approved amount $1,001 million ($1 billion) at all times. 

The acquisition would mark OVL’s entry into oil-rich Azerbaijan. OVL is expecting to close the deal by the first quarter of 2013.

ACG, which is located in the south Caspian Sea about 95 km off the coast of Azerbaijan, is the largest oil and gas field complex in that country and is one of the largest producing oil fields in the world.

BP operates ACG and is partnered by State Oil Company of Azerbaijan Republic (SOCAR), Chevron, Statoil, ExxonMobil, Inpex, Turkish NOC -TPAO and Itochu. Average daily production from the field is around 700,000 barrels of oil per day (bopd).

The potential ultimate recovery from the field is estimated at over 5 billion barrels of oil.

The 1,768-km BTC pipeline is one of the main export routes for Caspian crude oil production with a capacity of around 1 million bopd to the Ceyhan terminal in the Mediterranean Sea in South-East Turkey.

This acquisition would bring nine per cent additional proven reserves to OVL's portfolio, the company had said.

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