ONGC Videsh (OVL), the overseas arm of the India-based Oil and Natural Gas Corporation (ONGC), is to acquire a participating interest in the North Caspian Sea Production Sharing Agreement oil field from ConocoPhillips, for a consideration of $5bn.

The North Caspian Sea Production Sharing Agreement includes the Kashagan oil field, located in shallow water depths of five to eight metres in the Kazakh North Caspian Sea, and is considered the largest development project in the world.

The acquisition of the stake in Kashagan is of strategic importance to India as part of its energy security plan.

Under the terms of the agreement, ONGC will buyout ConocoPhillips’ entire 8.4% stake in the Kashagan field, where Total, Shell, ExxonMobil and KazMunaiGaz each hold 16.81%, while Inpex holds 7.56%.

From the first phase, ONCG will be entitled to annually receive 1.0MMT for 25 years, with a peak of 1.6MMT when the field becomes operational in the first half of 2013.

ONGC’s share is also expected increase significantly when the subsequent two phases become operational.

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By GlobalData

Commenting on the development, ONGC Chairman Sudhir Vasudeva said the acquisition was a major step in achieving its plans to increase OVL’s oil and gas production, from the current level of 8.75 MMTOE to 20 MMTOE by 2018 and 60 MMTOE by 2030.

ConocoPhillips’ commercial, business development and corporate planning executive vice president Don Wallette said: "The sale of this quality asset is an important component of our ongoing strategic asset disposition programme."

The carrying value of the net assets related to ConocoPhillips’ interest in Kashagan was about $5.5bn as of 30 September 2012.

Image: Relief location map of the Caspian Sea, where the Kashagan oil field is located. Photo courtesy of Uwe Dedering.