OVLآ’s Angola deal hostage to BP and Shell rivalry

Vol 7, PW 25 (10 Mar 04) People & Policy

ONGC Videsh is happy that Shell and operator BP have resolved a dispute over Angolas offshore Block 18, where both companies hold 50%.

This further smoothens the way for OVLs bid to completely buy out Shells 50% stake. During discussions about OVLs acquisition in Angola, the Indian oil ministry raised concerns over Shells refusal to approve BPs development and production plan for a portion of Block 18.

Concern also centred on disagreement between Shell and BP over the award of service contracts and the budget for 2004. Faced with Shells opposition, BP decided to proceed anyway.

On 23rd January, OVL submitted a bid for Shells 50% stake with a strict condition: its bid is dependent on Shell and BP resolving their dispute amicably by 22nd March. If they didnt, OVL made it clear that its valuation of the Shell stake would be hit.

Luckily for OVL, Shell and BP seem to have put the dispute behind them. Thankfully, both of them have sorted out their dispute, says a source.

The development plan and the work programme and budget for 2004 are now under approval by the Angolan authorities. Closer to home, OVL has to contend with another problem: adverse fall-out of the wide publicity generated in the Indian media about its proposed Angola deal.

Shell is furious that a lot of commercially sensitive details about the deal are being leaked to Indian newspapers by people in the know, we are told. OVL is worried that Shell might cancel the deal citing breach of confidentiality.

We learn Shell representatives in India have conveyed to OVL bosses their companys displeasure about leaks to the press. Exact figures of the amount that OVL is willing to pay for Shells 50% stake in Block 18 are unavailable.

But industry sources speculate OVL is willing to invest up to $2bn, including an upfront payment of between $700m and $1.1bn and cash for its share of development costs.