ONGC Videsh Inks Deal with Rosneft to Up Stake in Russia's Vankorneft

India's ONGC Videsh Ltd. announced Wednesday that the firm and its wholly owned subsidiary ONGC Videsh Vankorneft Pte. Ltd., Singapore (OVVL) inked agreements with Russia's OAO Rosneft to acquire an additional 11 percent shares in JSC Vankorneft, which operates the Vankor oil and gas condensate field and North Vankor license in Russia.

The acquisition will increase ONGC Videsh's shareholding to 26 percent, following the closure May 31 of an earlier purchase of 15 percent stake in Vankorneft for around $1.27 billion. The latest transaction, subject to relevant Board, Government and Indian and Russian regulatory approvals, is expected to close by end of 2016.

ONGC Videsh CEO and Managing Director Narendra K. Verma and Rosneft Chairman Igor Sechin signed the agreement in Moscow.

Vankor is Rosneft’s and Russia’s second largest field by production, totaling around 421,000 barrels per day (bpd) of crude oil, accounts for 4 percent of the country's production. ONGC Videsh's share of Vankor's crude oil production will amount to about 110,000 bpd when the latest acquisition is completed.

"The acquisition of additional 11 percent bears significant strategic importance and would add about 30 percent to the existing ONGC Videsh’s production at the current rate and  approximately 2.2 million tons of oil and 35.3 billion cubic feet (1.0 billion cubic meters) of gas annually," the company said in the press release.

The acquisition of a larger interest in Vankor is in line with the goal of meeting India's growing energy needs. The country's Minister for Petroleum and Natural Gas Dhamendra Pradhan said recently that Indian oil demand is projected to increase 11 percent this year on the back of strong economic growth.

The South Asian nation, the world's third largest oil user, consumed 4.159 million barrels of crude oil in 2015, according to BP Statistical Review of World Statistics.

ONGC Videsh is the international upstream arm of India's state-owned Oil and Natural Gas Corp. Ltd. (ONGC).