ONGC, Oil India Ordered to Buy ‘Big’ Assets Overseas (Update2)
March 18 (Bloomberg) -- India, planning a sovereign wealth fund to help companies compete with China for overseas energy assets, has ordered state-run Oil & Natural Gas Corp. and Oil India Ltd. to speed up purchases in the year starting April.
“We are urging our companies to get at least one big asset each next fiscal” year, Oil Secretary S. Sundareshan, the senior-most bureaucrat in the petroleum ministry, said in a telephone interview in New Delhi today. “We are looking for producing assets overseas.”
China, with $2.4 trillion of foreign-exchange reserves and a $300 billion sovereign fund, has outpaced India in the global quest for resources to feed the world’s fastest-growing major economies. Chinese companies spent a record $32 billion last year buying oil, coal and metals assets abroad, while a $2.1 billion investment by ONGC was India’s sole energy acquisition.
“Energy security is one of the most pressing issues for India,” Vikas Pershad, Chicago-based chief executive officer of Veda Investments LLC, said by telephone. “The companies will need a push and all the help they can get from the government.”
India’s oil ministry has formally asked the finance ministry to set up a fund using a part of the country’s $254 billion of foreign-exchange reserves, a government official said this week. The size of the fund is yet to be determined, he said.
‘We Have a Target’
“Overseas acquisitions are always a focus,” R.S. Sharma, chairman and managing director of ONGC, said by telephone today. “We have a target and the way to achieve that is to acquire assets overseas,” he said, referring to the company’s production goal.
New Delhi-based ONGC, producer of almost 25 percent of the crude oil in Asia’s third-largest energy-consuming nation, last year bought Imperial Energy Plc for 1.4 billion pounds ($2.1 billion) in India’s biggest energy acquisition.
ONGC and Oil India are part of a group that won the rights to develop the Carabobo 1 block in Venezuela last month, a project that may require investment of $19 billion.
“There are a number of other assets around the world where we are in various stages of negotiations and scrutiny,” N.M. Borah, chairman and managing director at Oil India, said by telephone today, declining to give more details.
Companies including ConocoPhillips and Devon Energy Corp. put up assets for sale to raise money following the worst financial crisis since World War II. Conoco said in October it will sell $10 billion in oil and gas properties and refineries during the next two years.
BP Plc this month bought Devon Energy’s assets in Brazil, the Gulf of Mexico, and Azerbaijan for $7 billion.
Cnooc Ltd., China’s biggest offshore oil explorer, on March 14 agreed to buy half of Argentina’s Bridas Corp. for $3.1 billion, its biggest purchase, capping $6.6 billion of acquisitions on three continents in the past four years. Cnooc bought a stake in a Nigerian oil field in 2006 after India’s government blocked ONGC’s plan to buy the share.
China Investment Corp., the country’s $300 billion sovereign wealth fund, last year invested in energy and mineral producers in nations including Canada, Indonesia and the U.S. while China Development Bank Corp. gave China National Petroleum Corp., PetroChina Co.’s parent, a $30 billion loan at a discounted interest rate to fund overseas expansion.
India is interested in partnerships with Rosneft Oil Co. and Gazprom OAO to explore for oil and gas in Russia, an Indian government official said March 11.
“When Indian companies are up against large competitors like the Chinese, they must be willing to pay a bigger price for assets,” Pershad of Veda Investments said today. “India has to be focused on the long-term.”
Demand for fuel in India, the world’s second-most populous nation, may rise as growth in the $1.2 trillion economy accelerates and output from aging domestic fields declines. India’s finance ministry expects gross domestic product to expand 8 percent in the year starting April 1. The South Asian nation imports more than 75 percent of its crude oil needs.
India’s total energy consumption may more than double by 2030 to 833 million tons of oil equivalent, based on current trends, driven by population growth and an industrial build-up, according to the Paris-based International Energy Agency.
To contact the reporter on this story: Rakteem Katakey in New Delhi at firstname.lastname@example.org. Last Updated: March 18, 2010 05:28 EDT