India Rejects ONGC Plan to Buy Stake in Akpo Oil Field

NEW DELHI, Dec 16, 2005 (Dow Jones Commodities News via Comtex)

A risk-averse Indian government panel that met late Thursday rejected petroleum exploration company ONGC Videsh Ltd.'s plan to acquire a 45% stake in an offshore oil and gas field in Nigeria for around $2 billion because it wasn't commercially viable.

"It was a very large investment to commit for the project and the government felt it fell short on viability parameters," a senior Indian Petroleum Ministry official familiar with the developments told Dow Jones Newswires Friday.

"The rate of return on the investment also didn't seem to be very comfortable," he added.

ONGC Videsh wanted to buy the stake of Nigeria's South Atlantic Petroleum Ltd. in Akpo. South Atlantic Petroleum is owned by a former Nigerian minister.

ONGC Videsh is a wholly-owned overseas exploration unit of Oil & Natural Gas Corp. (500312.BY), the country's flagship petroleum producer.

Indian Finance Minister P. Chidambaram, who briefed reporters earlier Friday on the Cabinet Committee on Economic Affairs meeting, said the panel didn't approve an ONGC Videsh proposal to bid for a Nigerian oil field. He didn't elaborate.

Wood Mackenzie, an energy consultant based in Edinburgh, Scotland, estimated Akpo's recoverable reserves of light oil condensate at 620 million barrels, and natural gas at 2.5 trillion cubic feet.

ONGC Videsh currently has stakes in exploration ventures in 17 oil and gas properties in 13 countries - Vietnam, Russia, Sudan, Iran, Iraq, Libya, Myanmar, Syria, Ivory Coast, Australia, Qatar, Cuba and Egypt - to supplement India's locally-produced oil and gas amid rising demand.

India's overall crude oil output has stagnated around 33.3 million metric tons a year, or 668,700 barrels a day, over the past three years, while its gas output of about 83 million cubic meters a day meets only around 60% of domestic demand.

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