Petronas and CNPC block OVL Sudan deal

Vol 6, PW 21 (18 Dec 02) Exploration & Production
     

THERES TROUBLE ahead for ONGC Videsh as it pursues its acquisition of a 25% stake in Sudan's Greater Nile Oil Project from Talisman Energy of Canada.

A source reveals that Petronas of Malaysia (30%) and China National Petroleum Corporation (40%) - Talisman's partners in the project - are blocking OVL's entry by exercising their 'right of pre-emption' over Talisman's decision to sell to OVL. Talisman signed an agreement on 31st October to sell its stake to OVL for $720m but the deal is contingent on approval by Petronas and CNPC who have the right to exercise first right of refusal within 60 days - something they have now done.

Clearly a question mark hangs over the sale: Petronas and CNPC are within their rights to object. Will the deal collapse Its unlikely.

"Existing partners and OVL will have to sit down and talk things over," reveals a source. But we can expect some hard bargaining by Petronas and CNPC before they allow OVL to join the consortium.

"Talisman was the driver of the Greater Nile Oil Project and kept a lot of the key positions to itself," we learn. "We might have to trade some of these as the price for their approval." Alternatively, OVL expects Petronas could ask for a stake in a producing domestic field owned by ONGC.

Under the agreement with Talisman, OVL has until the end of January 2003 to close the deal. Yet OVL is confident in the knowledge that Sudanese authorities don't want any one company holding more than 40% equity.

Early this month an OVL delegation visited Malaysia to persuade Petronas to drop its objection.