05/09/2018 – News / Oil & Gas / Investment / ONGC Videsh / GlobalData / India
Megaprojects in Russia, UAE and Mozambique are primary value drivers for possible ONGC Videsh IPO, says analyst
Following the recent news of a possible IPO for ONGC Videsh – the overseas investment subsidiary of the Indian national oil company – Jonathan Markham, Oil & Gas Analyst at leading analytics firm GlobalData, explores the projects in which ONGC Videsh is involved alongside the key elements of its portfolio.
Over the 2018-19 fiscal year, the Indian government has targeted divestment of US$11-12 billion (INR800 billion) in publically owned companies – yet has only reached around 10 per cent of the mark so far this fiscal year, according to Mr Markham. “An IPO for ONGC Videsh represents an option for the government to extract value from the rising oil prices, across investments made globally,” he observed. “The capital raised from a stock listing is expected to be transferred to ONGC’s stakeholders, of which the government is a major one with a 67.45-per-cent stake. If the company is listed in India, the minimum listing is 25 per cent, which could result in a target valuation of up to US$3 billion.
“ONGC Videsh owns stakes in 26 producing projects across 11 countries, as well as a major announced project in Mozambique,” Mr Markham continued. “GlobalData estimates these projects to have remaining net present value at a 10-per-cent discount rate (NPV10) of around US$11 billion and reserves of approximately two billion barrel of oil equivalent (boe). The largest portion of the portfolio is in Russia, with 65 per cent of the remaining NPV10 and 50 per cent of the remaining reserves coming from stakes in the producing Sakhalin 1 and Vankorskoye projects.
ONGC Videsh acquired 26 per cent of Vankorneft in 2016 and is forecast to spend US$2 billion of capital expenditure (capex) in Russia up to 2025, the GlobalData analyst noted. “Other major producing projects in ONGC Videsh’s portfolio include Lower Zakum in the UAE, for which it paid a US$600 million participation fee in 2018, ultra-deepwater developments in Brazil’s block BC-10 and the Shwe gas project in Myanmar.”