ONGC once again loses out to China for oil assets in Africa

In the absence of a domestic sovereign wealth fund backing, public sector oil explorer Oil and Natural Gas Corporation (ONGC), has once again lost the race to acquire energy assets to China's large state owned enterprise, the latest in a string of losses to its cash rich neighbour.

ONGC Videsh, the overseas arm of ONGC has been outbid by CNOOC, China's third-largest oil company in acquiring a 50-per cent interest in Uganda's oil fields.

Heritage Oil, the Jersey-based independent oil and gas exploration company, had struck a deal in November 2009 to sell its 50-per cent stake in Blocks 1 and 3A of the oil-rich Lake Albert Basin in Uganda to Italy's largest oil and gas company Eni S.p.A for $1.5 billion. (See: Heritage Oil to sell its Ugandan oil blocks to Eni for $1.5 billion)

Heritage Oil and Tullow Oil held 50 per cent stake each in the Blocks, but Tullow Oil acquired it partner's 50-per cent stake by exercising its pre-emption rights.

Tullow, which became the sole owner of the Blocks, had put 50 per cent of its interest for sale as the project required huge investments to build a 1,200 kilometre pipeline to the Kenyan port of Mombassa to export the oil as well as building a refinery.

ONGC Videsh had initially partnered with the UK's Scotland-based independent oil explorer Cairn Energy, which has oil production interest in Rajasthan, to bid for the 50-per cent interest.

After Cairn Energy backed out from the bidding, ONGC Videsh teamed up with Oil India and Indian Oil Company to make a $2.1-billion bid.

Heritage Oil had awarded the stake to CNOOC last month as the Chinese oil major had made a superior bid of $2.5 billion. (See: Tullow Oil sells stake in Uganda's oil fields to CNOOC for $2.5 billion) 

The deal was signed by CNOOC and Heritage Oil this week in London.

This was the second such bid that ONGC lost to CNOOC in the past two months. In January, an ONGC-led consortium lost a bid for an Algerian oilfield to a consortium led by CNOOC. (See: ONGC loses Algerian oilfield bid to China's CNOOC-led consortium) 

Armed with more than $2.4-trillion in foreign exchange reserves as of last month, China has supported its oil companies to make landmark overseas acquisitions in the energy and minerals sector.

Constantly being outbid by Chinese sovereign fund-backed rival China for overseas energy acquisitions, despite foreign exchange reserves of $283.5 billion, India is finally mulling setting up a sovereign wealth fund to help its oil companies make much-needed energy acquisitions overseas. (See: India mulls setting up sovereign wealth fund) 

The country is finally planning to set up a $20-billion sovereign fund to aid state-owned ONGC to compete with its Chinese rivals in overseas acquisitions.

India currently produces 680,000 barrels of oil per day and spends close to $124 billion (Rs600,000 crore) to import 75 per cent of its crude oil requirement.

According to the Paris-based International Energy Agency, India's energy consumption is likely to more than double by 2030 to 833 million tons of oil equivalent, which would make the country's import bill soar to more than $248 billion if taken at an average price of $66 a barrel of crude.

Some of China's significant acquisitions and investments overseas in 2009
Acquirer Target Value (US$) Country Industry Month Notes
Shenzhen Zhongjin Lingnan (Chinas third-largest zinc producer) Perilya Mining (zinc miner) $29.8 million Australia Metals February Acquired 51 per cent stake
Hunan Valin Iron & Steel (Chinas ninth-largest steel producer) Fortescue Metals Group (Australias third largest producer of iron ore) $438 million Australia Iron ore February Acquired 9.79 per cent stake
China Minmetals OZ Minerals $1.21 billion Australia Iron ore April Acquired most of the assets
China Nonferrous Metal Mining Group (State- owned metals and mineral trading company) Lynas Corp (rare-earths metals producer) $186million Australia Metals April Took a majority stake
PetroChina (State-owned oil giant. No. 2 on the Fortune 500 list) Sinapore Petroleum Corporation $1.02 billion Singapore Oil May Acquired a 45.5 per cent stake from Keppel Corp
Haier Group (Chinas largest appliances company) Fisher & Paykel $29 million New Zealand Appliances May Acquired a 20 per cent stake
Sichuan Tengzhong Heavy Industrial Machinery General Motors-Hummer brand $100 million (estimated price) US Automobile June Chinese regulator has voiced concern over the acquisition
Wuhan Iron & Steel (Chinas fourth biggest steelmaker) Consolidated Thompson Iron Mines Limited $240 million Canada Iron ore June Wuhan Iron & Steel acquired 19.9 per cent stake to gain access to iron ore
CIC (The $300 billion Chinese sovereign wealth fund Goodman Group (Australias largest industrial property trust) $585 million Australia Real Estate June CIC and Goodman formed a partnership, with CIC receiving an 8 per cent equity stake for an A$200M debt facility plus A$500M of convertible debt
CIC Blackstone Group (Asset management Company) $500 million US Financial June CIC increased investment in hedge fund unit
CIC Diageo PLC (UK beverages giant-maker of Johnnie Walker whisky) $365 million UK Beverages July CIC took 1.1 per cent stake
Sinopec Group (Chinas second-largest oil company) Addax Petroleum $7.2 billion Switzerland Oil July Acquired the Swiss oil explorer with significant assets in Africa & Iraq
CIC Teck Mining Company (Canadas largest diversified miner) $1.5 billion Canada Coal July Acquired a 17.2 per cent stake
Yanzhou Coal Mining (Chinas fourth-biggest coal miner) Felix Resourses (producer of high-grade semi-soft coking coal, used by steelmakers $2.95 billion Australia Coal August Took over the entire company
PetroChina Athabasca Oil Sands $1.9 billion Canada Oil September Acquired 60 per cent stake in two planned Canadian oil sands projects
(Ravi Kunder /