L N Mittal has had enough of oil, to exit Kazakh fields

Nov 18. Economic Times. NEW DELHI

By Supriya Shrinate & Soma Banerjee

L N Mittal has had enough of oil, to exit Kazakh fieldsL N Mittal has pulled out of a project to develop an oil block in Kazakhstan with joint venture partner ONGC Videsh, possibly signalling the approaching end of what has been a moribund relationship for years.

Mr Mittal is also believed to be on the lookout for buyers for another of his oil assets in the Central Asian nation, an indication that the steel tycoon’s flirtation with the oil sector may be drawing to a close.

“Mittal Investments has decided that it does not wish to pursue the investment opportunity in Satpaev. This will now be developed by ONGC Videsh alone,” a Mittal group representative wrote in an email to ET NOW, this paper’s television channel.

ONGC Mittal Energy (OMEL), a joint venture between Mittal Investments and ONGC’s overseas arm OVL, was to have acquired a 25% stake in the Satpaev block from state-owned KazMunaiGaz and invested a total of $400 million in the project.

The OVL board that met on Tuesday has decided to write to the Kazakh government and move towards acquiring the Mittal Investments’ interest in Satpaev. OVL will have the option to increase its stake by another 10% when oil is discovered.

Mittal Investments is trying to find a buyer for its 50% stake in Caspian Resources and may eventually sell it to Russia’s Lukoil, persons familiar with the matter said.

Mittal Investments bought the stake in Caspian Resources, which has oil reserves in Kazakhstan, from Lukoil in 2007 for nearly $1 billion.

The Mittal group declined to comment on this matter. But their representative wrote that ONGC Videsh has indicated it does not want to join the investment in Caspian Resources.

The joint venture OMEL was to buy a stake in Caspian Resources but Mittal Investments went ahead and invested on its own saying the Kazakh government wanted it that way. Mittal later offered OVL a stake in Caspian Resources, which the government-owned firm has declined.

Since the joint venture was formed in 2005, what OMEL has to its credit so far is only a producing oil asset in Syria and exploratory blocks in Nigeria. Another joint venture between Mittal and ONGC for trading in oil and gas was merged with OMEL after it lay dormant for a long time.

Mr Mittal had told ET NOW in an interview in June that his interest in the oil sector had been very limited but he wanted to help India attain energy security.

“The Indian government wanted my support … So I said fine, I will do whatever I could in my limited way because this is not my core business. My core business is ArcelorMittal.”

The LN Mittal Group has also partnered HPCL for the Bhatinda refinery project, which appears to be on track.

Despite the widespread belief that the joint venture is on its last legs, OMEL maintained that the partnership ” remains strong and both parties will continue to look for other interesting investment opportunities in the oil and gas sector, both in Kazakhstan and beyond.”