OVL’s $5-bn Kazakh deal faces hurdle

Almost a month after it announced its biggest acquisition, ONGC Videsh Ltd (OVL) is facing a roadblock.

The company had planned to invest around $5 billion to acquire ConocoPhillips’ 8.4 per cent stake in Kazakhstan’s Kashagan field. But KazMunaiGaz National Co, the Kazakh state energy producer, has said it will decide within two months on acquiring a stake in the project that ConocoPhillips intends to sell to OVL. According to the Kazakh law, the government gets priority to buy any oil asset for sale in its territory. The government passed the law in 2005, before using the right to buy half of BG Group Plc’s stake in Kashagan.

“The company is considering this question,” Malik Salimgereyev, managing director of Kazakh sovereign wealth fund, Samruk-Kazyna, told reporters in Astana, the country’s capital. Samruk-Kazyna owns the national energy producer. Bloomberg quoted KazMunaiGaz as saying that it would borrow internationally to fund the acquisition if it decided to exercise its rights to the stake.

When contacted, OVL Managing Director D K Sarraf said: “All the existing shareholders in the field have the first right of refusal, including KazMunaiGaz. One or more of them can exercise the first right of refusal. We will have to wait and watch. We have been working on this deal for months and thus we would want this deal to go through.”

Sarraf added the first right of refusal available with the existing partners was 60 days and then another 180 days with the government to grant approval. After that, OVL would begin work on mobilising resources for the $5-billion deal to fructify.

Other than KazMunaiGaz, Kashagan’s consortium partners are Eni, Total, Shell and ExxonMobil — each with 16.81 per cent stake, while ConocoPhillips has 8.40 per cent and Inpex 7.56 per cent participating interest.

Last month, OVL said it had finalised definitive agreements for acquisition of ConocoPhillips’ 8.4 per cent participating interest in the North Caspian Sea production-sharing agreement that included Kashagan field. The deal is expected to be closed during the first half of next calendar year.

NYSE-listed ConocoPhillips is the third-largest energy company in the US.

This could also be a dampener for the plans of ConocoPhillips, which had, while announcing the deal, said: “The proposed sale would increase value for shareholders through focused capital investments and a commitment to deliver growth in production and cash margins, improved returns on capital, and sector-leading shareholder distributions.”

OVL, with its 8.4 per cent stake, planned to get 315,000 tonnes of oil in the first year. The share would go up to 4.2 million tonnes a year in 2028 when all the three phases of the field have been fully developed.

The acquisition would mark OVL’s entry into the largest oil-proven North Caspian Sea of Kazakhstan. The Kashagan field, located in the shallow waters of the Kazakh North Caspian Sea, is the world’s largest current development project.

The stake buy would help OVL offset the drop in output from its assets in Syria and Sudan, which had brought its total output down by seven per cent in 2011-12.

Considered the biggest find so far, the Caspian Sea field is expected to produce 370,000 barrels a day from next year. Developing the field would cost tens of billions of dollars, or more.

If the deal does go through, it would be the second big-ticket acquisition for OVL after Imperial Energy, which it acquired for $2.1 billion in 2009.

Article sourced from the Business Standard


Kazakh company increases some ores extraction in first quarter of 2012

Kazakh metallurgy group Eurasian Natural Resources Corporation PLC (ENRC) increased extraction of some ores in the first half of 2012 compared to the same period of 2011, the company reported on Wednesday.

In particular, the company increased chrome ore extraction by 5 percent to 1.267 million tons compared to the same period of 2011. Manganese ore extraction hit 750,000 tons in the reporting period (1.8 percent increase compared to the same period of 2011). Copper extraction increased by 14.2 percent to 418,000 tons and cobalt ore production increased by 39.2 percent to 341,000 tons.

Meanwhile iron ore extraction fell by 6.8 percent to 9.893 million tons in the reporting period.

In January-June 2012 ENRC also increased coal extraction to 4.392 million tons (0.7 percent increase compared to the same period of 2011).

ENRC’s aluminum production remained at the level of 62,000 tons in the first half of 2012 as it was in the same period of 2011.

Company’s alumina production decreased by 8.1 percent to 376,000 tons in the reporting period.

Ferroalloys production decreased by 0.9 percent to 435,000 tons in the first six months of 2012.

Eurasian Natural Resources Corporation is one of the leading diversified natural resources groups with integrated mining, processing, energy, logistical and marketing operations. ENRC production assets are largely located in Kazakhstan. Moreover the company operates in China, Russia, Brazil and Africa (the Democratic Republic of Congo, Zambia, Mozambique and South Africa). ENRC is the world’s largest producer of ferrochrome on a chrome content basis and one of the world’s significant iron ore and alumina producers.

Article sourced from Trend

ArcelorMittal Kazakh Unit Second-Quarter Output Fall on Accident

ArcelorMittal (MT)’s Kazakh unit said second-quarter production was “worse than expected” after an accident at a sintering plant in May.

Rolled-steel output fell 15 percent to 712,900 metric tons from 839,700 tons a year earlier, the AO ArcelorMittal Temirtau unit, said today in an e-mailed statement. That was less than the 715,600 tons produced in the first quarter.

The company cut liquid-steel output 21 percent to 769,200 tons in the second quarter from a year earlier, according to the statement. The company produced 811,800 tons in the first three months of the year.

“The second quarter results were worse than we expected,”Vijay Mahadevan, general director at ArcelorMittal Temirtau, said in the statement. “Production was restricted by the accident at the sintering plant in May, as well as unstable operations of a number of the metal company’s units.”

Article sourced from Bloomberg Businessweek