Cabinet nod for deal to merge ONGC’s Russian assets

The union cabinet has approved a merger of Oil & Natural Gas Corp's Russian assets with Sistema-promoted Bashneft and RussNeft in a deal that will give the state-run explorer a 25-per cent stake in the combined entity and access to one of the biggest discovered oilfields in Russia, The Economic Times reports.

Oil and Natural Gas Corp (ONGC) has long been eyeing Bashneft as well as an involvement in the Arctic fields Trebs and Titov that the Sistema subsidiary acquired last year from the Russian state.

The merger will give ONGC a quarter share in the Russian firm's annual oil production of 25 million tonnes, besides a management say and partnerships in their refineries totalling 20 million tonnes capacity, the newspaper said today.

Indian Oil Corp may also join ONGC in the venture, the paper said, citing officials in the oil ministry.

The approval has come weeks before the 30 June deadline set by two parties to conclude terms of the deal.

ONGC is demanding tax breaks for its project Sakhalin-I and its recent acquisition, Imperial Energy.  ONGC Videsh, the corporation's foreign arm, had acquired Imperial Energy in 2009 for $2.1 billion but it was not able to generate a decent profit due to high taxes.

ONGC already has a stake in Russia's Sakhalin-1 oil and gas project in the Pacific, and in 2008 it acquired the Imperial Energy oil company in western Siberia.

Last December, the Russian oil-to-telecom holding firm Sistema and ONGC signed a non-binding agreement to consider assets swaps and joint tapping of Russia's energy deposits.