ONGC eyes Chesapeake Energy's shale assets: report

27 Jun 2013

India's state-owned Oil and Natural Gas Corporation (ONGC) is planning to buy Chesapeake Energy's oil and gas assets in the US, The Economic Times today reported, citing a senior executive at ONGC's overseas arm ONGC Videsh (OVL).

"We have seen Chesapeake's assets across the US. They are good assets, they were one of the first companies to start large-scale gas production in the US, we are evaluating it," the OVL executive told the paper.

In early 2012, Chesapeake, the second-largest producer of natural gas in the US, had said that it would raise around $12-billion by selling assets as part of its 2012 financial plan to reduce debt and fund its ongoing operations. (See: Chesapeake Energy announces $12-bn asset sale to reduce debt)

Since then, it has sold several of its gas and unconventional liquids-rich tight sand play assets to companies, including BHP Billiton, EIG Global Energy Partners, private equity firms Blackstone Group and TPG Capital and Access Midstream Partners.

Chesapeake prospered during the shale gas boom in the US and went on an acquisition spree of unexplored shale gas fields. The company has good natural gas shale acreages in the Barnett in Texas, and the Haynesville in Louisiana and Arkansas, which together make for almost half its total output.

For ONGC, a completed deal will allow it to enter into the US gas market and gain valuable technology in extracting shale gas.

The deal would also come a few days after it and OIL India teamed up to buy Videocon Industries 10 per cent stake in the highly prolific Rovuma offshore gas field in Mozambique for $2.48 billion. (See: OVL, Oil India to buy Videocon's stake in Mozambique gas field for $2.48 bn)

This year, OVL also acquired two oilfields in the Azerbaijan sector of the Caspian Sea and a 2.36-per cent interest in the Baku-Tbilisi-Ceyhan pipeline from US-based Hess Corp for $1billion.

It has also tabled a $5-billion bid for Conoco Phillips' 8.42-per cent stake in the massive Kashagan oilfield located in the Caspian region of Kazakhstan.

Seven partners in this field have waived their first right of refusal, while the Kazakhstan government now has till end of July to decide whether to exercise its pre-emption right.

It could, however, end up losing out on this deal since Kazakhstan plans to buy the stake and resell it a Chinese energy company. (See: ONGC's $5-bn bid for stake in Kashagan oilfield hangs in balance)