ONGC to cut Imperial capex after delisting

Imperial,which produces oil in western Siberia,is expected to delist from the LSE on March 9.

Written by Reuters | Moscow | Published: March 3, 2009 11:43:55 am

ONGC,the new owner of Russia-focused Imperial Energy,will cut capital expenditures at the oil firm this year after the firm delists next week,industry sources said.

Imperial,which produces oil in western Siberia,is expected to delist from the London Stock Exchange on March 9,the firm said,once offers for bonds close that day.

State-controlled oil firm ONGC acquired Imperial Energy for 1.3 billion pounds ($1.85 billion) at the end of 2008,to the relief of investors who feared ONGC would back out of the high-priced deal,made when oil was around $130 a barrel.

Since the takeover it has also reshuffled its senior staff,almost all of whom have been replaced by ONGC Videsh,the firm’s overseas unit.

In January an ONGC official in New Delhi said the firm would invest $600 million over the next two to three years developing Imperial’s assets — the same figure it touted before the takeover — though industry sources believe it could be less.

“They’re there to build on it for a long time. There’s no point in spending lots of money this year when you can have it for 25 years,” said one source,who spoke on condition of anonymity.

ONGC has been charged with securing overseas energy resources to power India’s booming economy,and some believe the firm will favour a slower route than its previous owners,who enthusiastically increased reserves and had ambitious production targets.

Another industry source,who did not wish to be named,said ONGC would slash capex this year due to the global financial crisis — the firm reported a sharply lower-than-expected fourth quarter profit for last year.

“They’ve always been careful investors,and this could be the time to make some adjustments for Imperial,” he said.

ONGC could not be reached for comment,while a Moscow spokeswoman for Imperial declined to comment on capex.


But another unnamed source argued that $600 million was too much for ONGC,which was eyeing selling control of Imperial to Russian state-controlled oil giant Rosneft “either at the end of this year or in 2010”.

Rosneft,Russia’s No. 1 oil producer,has said in the past it was not interested in an Imperial stake but analysts and sources close to the firm have maintained it was keen.

ONGC is a partner in the Exxon-led Sakhalin-1 oil and gas consortium on the Russian Pacific island by the same name and analysts have said Rosneft,already operating the Sakhalin-3 project,would like to control more on the island.

Imperial owns oil licenses in the west Siberian region of Tomsk and hopes to produce 35,000 barrels per day (bpd) by the end of this year and 80,000 bpd by 2011,making it a perfect supplier for Russia’s first link to China,which should come on stream at the end of this year.

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