ONGC Videsh (OVL), the overseas arm of India's largest oil producer, ONGC, will now make a formal bid for UK's Imperial Energy within the next 28 days, as it met all the necessary requirements for approval of the Russian Federal Anti-Monopoly Service, Russia's anti-trust office.

Petroleum minister, Murli Deora had met Russian prime minister Vladimir Putin last Wednesday to push the deal through but had failed to reach a firm backing for ONGC's acquisition of Imperial Energy. (See: Russian regulators clear ONGC bid for Imperial Energy) 

Russian law requires that any acquisition of a Russian company have to mandatorily meet two preconditions. One requirement is approval on restrictions on ownership of Russian entities by entities controlled by a foreign government,  and the other, anti-monopoly regulations.

The deal was cleared when one regulator approved the ownership of Russian entities by foreign government owned entities while the other removed the last anti-monopoly hurdle by ruling that Imperial Energy was not a strategic asset.

ONGC Videsh has now informed the London Stock Exchange of the developments and is now expected to send documents of the original offer to UK listed Imperial Energy shareholders within 28 days, who in turn have 60 days to decide on the offer.

ONGC, India's biggest oil producer, had, in August, proposed to acquire the London-based Imperial Energy for 1,250 pence a share, valuing it at around $2.6 billion at a time when crude prices was $128 a barrel. Since then prices have plummeted to $57 a barrel as of yesterday.

The deal is likely to go through at the original offered price as the British takeover law prohibits from renegotiating and lowering the original offered price and Jarpeno, based in Cyprus which is a fully owned subsidiary of ONGC Videsh, will acquire the shares of Imperial.

On Monday, Imperial shares took a beating as Indian media reported that the Indian government was thinking of renegotiating the deal due to the steep fall in oil prices.

The mode of payment, as per the agreement is in sterling which has since fallen by 20 per cent against the dollar when ONGC first made the offer in August. ONGC will now be paying approx $2.1 billion as against its original offer of $2.6 billion.

ONGC had out bid China's Sinopec to acquire Imperial Energy which has oil producing assets mainly in the Tomsk region of Siberia and north Kazakhstan. (See: ONGC trumps Sinopec with $2.6-billion bid for UK's Imperial Energy)  

Since India has inadequate reserves of oil and is wholly dependant on oil imports, the Indian government has given the state controlled oil company, ONGC, the mandate to acquire overseas oil companies with oil producing assets for its ever increasing need although it is paying a massive premium in this acquisition.

ONGC had been on the lookout to buy oil production capacity in Russia for several years and it has a 20 per cent stake in the Sakhalin-1 oil and gas consortium headed by US major Exxon and also has 36 oil and oil assets in 16 countries.

Once the deal goes through, it would mark ONGC's biggest acquisition of an overseas oil company and the second investment in Russia.