ONGC gets cabinet nod for conversion of Rs5,000-cr loan to OVL into equity
23 Dec 2015
The Cabinet Committee on Economic Affairs (CCEA) has approved a proposal by state-run explorer Oil and Natural Gas Corporation Ltd (ONGC) for conversion of a loan of Rs5,000 crore extended to ONGC Videsh Ltd (OVL) into equity.
OVL is an ONGC subsidiary that undertakes overseas operations.
The approved investment will strengthen the capital base of ONGC Videsh. It will enhance the ability of ONGC to undertake overseas exploration and production (E&P) business, thereby improving the energy security of the country, an oil ministry release on Tuesday stated.
"The CCEA, chaired by Prime Minister Narendra Modi, has given its approval for investment of Rs5,000 crore by ONGC into the equity share capital of ONGC Videsh by conversion of existing loan of equivalent amount into equity," an official release said.
ONGC had extended a loan of Rs6,000 crore to its overseas investment arm to meet its acquisitions requirements. Of this, Rs5,000 crore is being converted into equity.
With this, the equity base of OVL will rise to Rs15,000 crore. This will enhance the ability of ONGC to undertake overseas Exploration and Production (E&P) business, thereby improving the energy security of the country, it added.
In addition to Rs6,614 crore loan from ONGC, the subsidiary has also raised Rs29,000 crore from the market.
All the loan ONGC had given to OVL was at zero interest.
ONGV Videsh had, in June this year, sought greater financial autonomy to decide on investments of up to $1 billion without government nod to speed up acquisition of overseas oil and gas fields.
Currently, OVL is allowed to invest up to Rs300 crore without seeking approval from the centre. Larger investments need approval of the Empowered Committee of Secretaries (ECS) and the Cabinet Committee on Economic Affairs (CCEA).
ONGC Videsh's E&P activities expanded in September, when it acquired a 15 per cent stake worth $1.3 billion in Russian company Rosneft's subsidiary Vankorneft, which has rights to Russia's largest oil field, the Vankor field in East Siberia.
OVL is also reportedly close to winning the $5-billion rights to develop Iran's Farzad-B gas field.
It is also close to winning the $5 billion rights to develop Iran's Farzad-B gas field.