India’s ONGC Videsh has agreed a $5 billion deal to acquire ConocoPhillips’ stake in the Kashagan oilfield project in the Caspian Sea off Kazakhstan.
The international arm of Indian state-owned Oil & Natural Gas Corporation (ONGC) will gain the US giant’s 8.4% interest in the North Caspian Sea production sharing agreement under the transaction unveiled on Monday.
ConocoPhillips said the carrying value of net assets related to its interest was around $5.5 billion, with expected proceeds from the sale put at $5 billion.
ONGC Videsh said the acquisition, subject to government and regulatory approvals and expected to close in the first half of 2013, would add an average of 1 million tonnes per annum (20,000 barrels per day) of output under the initial phase of the project, with a peak of 1.6 million tpa.
This figure would rise significantly under subsequent development phases, it added.
It marks the biggest-ever acquisition by the Indian company, which is looking to boost output from its present level of 8.75 million tpa to 60 million tpa by 2030.
The company is under pressure from the government to raise production to reduce India’s dependence on costly crude imports and fill increased refining capacity.
The shallow-water Kashagan field holds an estimated 30 billion barrels of oil in place, of which as much as 12 billion is potentially recoverable, and is due on stream next year.
Partners in the development consortium are Eni, Total, Shell, ExxonMobil and state-run KazMunaiGaz, each on 16.81%, ConocoPhillips with 8.4% and Inpex with 7.56%.
“The sale of this quality asset is an important component of our ongoing strategic asset disposition programme,” said ConocoPhillips’ executive vice president for business development, Don Wallette.
Closure of the deal would bring total assets sale by the US company so far to $7 billion, towards its goal of $8 billion to $10 billion in divestments of non-core assets by the end of 2013 to cut debt and boost its exploration budget.
The company said it would record an after-tax impairment of around $400 million in the fourth quarter as a result of the sale.