No comment on ONGC, Exxon deal

There was no comment from India's Oil & Natural Gas Corp. (ONGC) following a press report that the company is finalizing a deal to acquire Exxon Mobil's 30% stake in a Brazilian oil field for $1.5 billion.

Offshore staff

(Rio de Janeiro)- There was no comment from India's Oil & Natural Gas Corp. (ONGC) following a press report that the company is finalizing a deal to acquire Exxon Mobil's 30% stake in a Brazilian oil field for $1.5 billion.

A story in the Indian newspaperEconomic Times reported that ONGC's oversea unit, ONGC Videsh Ltd., was finalizing the deal with Exxon Mobil, in which ONGC may buy XOMs stake in the offshore BC-10 oil block in the Campos basin. A separate undisclosed source at ONGC said that negotiations are on, and the asking price is between $1.4 and $1.5 billion.

TheEconomic Times reported that ONGC now needs to talk to co-stakeholders Shell and Petrobras, as these companies have preemption rights on Exxon's participation in the block. Officials from these companies had no immediate comment on this development.

If the deal becomes a reality, it would fit well into India's strategy to find energy resources outside of the country, according to Lucrecia Tam, an oil analyst at Deutsche Bank in New York. Countries in the Asia-Pacific rim, particularly India and China, are aggressively seeking energy assets worldwide to meet burgeoning energy demands for their booming industries.

Tam added, however, that the proposed price tag is "on the high end," considering that the crude found in the block is heavy, between 17 to 24 degrees API. The estimated size of the reservoir, 400 MMbbl of oil, is surely a factor in ONGCs bid, regardless of density of the crude.

With the investment of $1.5 billion, ONGC would end up paying on the order of $10/bbl of oil in the new field. Tam considers this high, "considering that the company doesn't have much leverage in Latin America yet."

1/31/06

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