ONGC plans dollar bonds to fund $1-bn acquisition of Azerbaijan oilfields: report

State controlled energy giant, Oil & Natural Gas Corp (ONGC) is planning to sell dollar bonds to fund its $1-billion acquisition of US energy firm Hess Corp's stake in oilfields in Azerbaijan, Bloomberg today reported, citing an unnamed source.

In early September, ONGC Videsh Ltd (OVL), the overseas arm ONGC, had agreed to acquire Hess Corp's 2.72-per cent stake in the Azeri, Chirag and Guneshli (ACG) group of oil fields and its 2.36 per cent equity stake interest in the associated Baku-Tbilisi-Ceyhan (BTC) pipeline, for $1 billion. (See: ONGC Videsh buys Hess's stake in Azerbaijan's ACG fields for $1 billion)

The report said that OVL may raise almost the entire $1 billion by selling the notes overseas since borrowing funds from abroad are  cheaper, while rupee borrowing costs are about twice as much.

The ACG field, which lies 120 km off the coast of Azerbaijan in 120 meters of water, has total estimated reserves of over 6.5 billion barrels and produced 16.8 million tonnes of crude oil during January-June 2012.

The production sharing agreement (PSA) for the ACG field, signed in September 1994, covers the 30-year development of the Azeri-Chirag-Gunashli exploration area.

The Chirag oil project is currently at the execution stage with first oil expected in 2013, while overall production from all phases is expected to be about 1 million barrels per day.

The BTC pipeline transports crude from the Azeri capital city of Baku to the Mediterranean port of Ceyhan in Turkey via Georgia.