Aichi International - Conoco To Sell Kashagan Stake

Online, December 7, 2012 (Newswire.com) - Aichi International recently announced in a meeting that Oil and Natural Gas Corporation (ONGC), India's largest oil exploration company, has confirmed that they will acquire ConocoPhillips 8.4% stake in the project for $5 billion. If approval is given for the purchase, it will be the largest overseas acquisition by the state controlled company.

India is importing around 80% of its oil requirements due to its refining capacity having outgrown the local output. ONGC is looking at ways to increase production in order to fuel India's economic growth. However, the Kashagan field does present challenges with mounting costs and major delays at the project.

Kashagan, which lies under the northern Caspian Sea close to the Kazakhstani city of Atyrau, was discovered in 2000 and presents the largest oil field find in four decades. Aichi International allegedly believe that estimates of the reservoir contain around 35 billion barrels of oil, of which as many as 15 billion barrels are viable for extraction.

ONGC said that they expect their stake in the project to add around 20,000 barrels of oil per day to their annual production for a period of 25 years. Production at the field is expected to begin late next year, however it is already eight years behind schedule and costs have doubled up to $46 billion.

ConocoPhillips has been reducing its debt levels by divesting non core assets and as of the end of the third quarter, had a book value for its stake in the Kashagan project of $5.5 billion. Aichi International reportedly commented that this is a big plus for Conoco and $5 billion is a very good price plus it's a large step in their asset divestiture program.