ONGC, IOC, OIL to bid for ConocoPhillips Canadian oil sand assets worth $5 bn

11 Jul 2012

A consortium of state-owned energy explorers, Oil and Natural Gas Corp (ONGC), Oil India (OIL) and Indian Oil Corporation (IOCL) are placing a binding offer for part of ConocoPhillips' Canadian oil sand assets worth around $5 billion, the Economic Times today reported, citing two people with direct knowledge of the development.
 
The consortium, which is among the short-listed bidders, have appointed Canadian investment bank TD Waterhouse as advisor for the transaction, said the report.
 
The consortium has last week approached several banks, including Deutsche Bank, Standard Chartered Bank and Bank of America-Merrill Lynch to fund the deal, the source told the paper.
 
The consortium has yet to finalise the structure of the deal, but is likely to form a common overseas special purpose vehicle (SPV) to acquire the assets if they emerge as the winning bidder.
 
The consortium is bidding for a stake in six properties owned by ConocoPhillips in Alberta, Canada.  Early this year, ConocoPhillips had announced plans to sell 50 per cent of its stake in six Alberta properties spread over 715,000 acres that produce 12,000 barrels of oil a day from an estimated 30 billion barrels of bitumen.
 
The Alberta assets comprise the Surmont project, Thornbury, Clyden, Saleski, Crow Lake and McMillan Lake.
 
The Surmont project, located approximately 63km southeast of Fort McMurray, Alberta, in the Athabasca oil sands region, is the only producing asset and is operated by ConocoPhillips Canada.
 
The Surmont project is a 50:50 joint venture with Total of France and the partners are working on Phase 2, slated to begin production in 2015, which will increase gross production capacity from 27,000 to 110,000 barrels per day.

ConocoPhillips has retained Scotia Waterous to run the sale process and the first round of bids has attracted interests from international oil companies, including from China.

Houston-based ConocoPhillips had targeted divesting non-core assets worth $15 billion to $20 billion by the end of 2012 in order to fund share repurchases and position itself for future growth.
 
The company, which recently completed the spin-off of its refining activities into a newly-created independent company called Phillips 66, has already sold assets worth around $12 billion during 2010 and 2011, and received $9.5 billion by selling its shares in Lukoil, taking its total divestures to over $22 billion.

Its last sale was made in February, when it agreed to sell its Vietnam assets to French oil and natural gas company Perenco SA, for $1.29 billion.

ONGC, which is bidding for the stake through its overseas arm ONGC Videsh (OVL), had in March backed out from bidding for UK-listed Mozambique-focused oil and gas explorer Cove Energy.

ONGC already has stakes in 33 projects in 14 countries, including Vietnam, Myanmar, Russia, Syria, Egypt, Libya, Nigeria, Sudan, Brazil, Colombia, Venezuela and Cuba, but the company has not been able to bring any new major field in India into play in the past three decades.