ONGC to pay $135m for two Cairn Energy blocks
After more than a year of tough negotiations, ONGC and Cairn Energy have reached agreement on the details of a farm in to each others acreage.
Details of a deal revealed to PETROWATCH suggest ONGC will pay about $135m to Cairn Energy for stakes in two of the Edinburgh-based explorers India blocks. ONGC will get 90% and operatorship of deepwater exploration block KG-DWN-98/2, until now fully owned by Cairn through a subsidiary.
Also included in this deal is the Cairn-operated western offshore shallow water exploration and production block CB-OS/2 which contains the producing Lakshmi and Gauri gasfields. Barring these two discoveries, the rest of the block is still under exploration.
Cairn has agreed to farm out 15% and 10% respectively in the exploration and development areas of this block. In the exploration part, Cairn owns 75%, ONGC 10% and Tata Petrodyne 15%.
In the development phase, Cairn owns 50%, ONGC 40% and Tata Petrodyne 10%. Cairn will retain operatorship of CB-OS/2 even after the ONGC farm-in.
The Cairn-ONGC deal includes a swap where Cairn will buy a 30% stake in each of two ONGC onshore exploration blocks. One of them is the NELP-I Ganga Valley block GV-ONN-97/1 where ONGC (70%) and Indian Oil (30%) are partners.
The other block, CB-ONN-2001/1, is a NELP-III block in the Cambay basin fully owned by ONGC. Cairn will pay ONGC a total of $165,000 for this farm-in.
Cairn is keen to trim its India and Bangladesh acreage because of difficulties in raising funds to meet rising exploration and development costs. In November 2002, ONGCs board decided to evaluate Cairns India blocks (minus Ravva) and submitted an indicative, non-binding bid.
An internal evaluation convinced ONGC that only KG-DWN-98/2 and CB-OS/2 were worth considering.