* Consortium says still in running for oil sands assets
* Expects that new Canadian rules will not rule out deal
* No time frame for ConocoPhillips decision
By Prashant Mehra and Nidhi Verma
MUMBAI/NEW DELHI, Dec 11 India's state oil
companies intend to press ahead with plans to buy stakes in
Canada's oil sands and believe they will not run afoul of
tougher Canadian rules on foreign ownership of the sector.
A consortium of Oil and Natural Gas Corp, Oil
India Ltd and refiner Indian Oil Corp is
among three bidders short listed to buy stakes in Canadian oil
sands owned by ConocoPhillips. The assets could be worth
up to $5 billion.
"We are very much in race for Conoco's assets," an official
at one of the Indian consortium partners told Reuters, declining
to be identified. The consortium submitted its bid in July.
"Our deal will not be affected as our understanding of the
new rule is that JV (joint-venture) stake sale or
non-controlling stake sale are welcomed by Canada. However
complete takeover will be approved as an exception," he added.
On Friday, Canada approved a $15.1 billion bid by China's
CNOOC for Nexen and a $5.3 billion takeover
of Progress Energy by Malaysia's Petronas,
but shut the door on similar deals in the future.
Prime Minister Stephen Harper said Canada would not deliver
control of the country's oil sands -- the world's third-largest
reserves of crude -- to another government.
The tougher new approach restricts state-owned enterprises
to minority stakes in Canadian enterprises except in
"exceptional circumstances". However, when announcing the
changes last week, Harper said that state oil companies would
still be allowed to take minority stakes in tar sands
"Our understanding is the restriction would apply only in
the case of transactions at the corporate level and not at the
asset level," said a resources banker with a leading U.S. bank
in India, declining to be identified.
The ONGC-led consortium has not asked for any clarification
yet on the new rule, the official said.
T.K. Ananth Kumar, director of finance at Oil India Ltd, one
of the consortium partners, said the group would be discussing
the development with bankers.
"Getting into unconventional energy is important for us. We
want to get into this if the returns are good, that is why we
have agreed to partner," he told Reuters.
In January, ConocoPhillips put stakes in six Alberta
properties on the auction block. They produce 12,000 barrels of
oil per day from a resource estimated to be as large as 30
billion barrels of bitumen.
The one producing project in the package is Surmont, run in
a joint venture with France's Total SA. Located south
of the oil sands hub of Fort McMurray, Alberta, the steam-driven
development pumps about 25,000 barrels per day. The partners are
working to boost that to 136,000 bpd, starting in 2015.
ConocoPhillips has not yet said when it will wrap up the
sale process. Ken Lueers, the president of Conoco's Canadian
unit, declined to specify how many bids had been received for
"We had targeted to raise $8 (billion) to $10 billion
dollars in asset sales by the end of 2013," Lueers told Reuters
following a speech to a Toronto investment conference. "So we
went through the marketing, we received the bids, a number of
bids actually, and we're continuing to evaluate them."
SEARCH FOR ASSETS
Rising energy demand in India and stagnant domestic output
have made the country the world's fourth-biggest crude importer.
Western sanctions squeezing Iran, once India's
second-biggest supplier, have added urgency to New Delhi's quest
to secure additional energy sources.
India's state oil companies, tasked with scouting for oil
and gas assets abroad to meet rising demand in the nearly $2
trillion economy, have moved with uncharacteristic speed in
recent months to secure interests overseas.
Last month, ONGC Videsh, the overseas arm of state-run ONGC,
agreed to pay about $5 billion for ConocoPhillips' 8.4 percent
share of the Kashagan field in Kazakhstan, the world's largest
oilfield discovery in four decades -- which could boost its
output by about 16 percent within a year.
Earlier this year, it also agreed to pay $1 billion for a
small stake in the Azeri, Chirag and Guneshli (ACG) group of oil
fields in Azerbaijan and a stake in an associated pipeline.
State-run GAIL India is also considering buying
liquefied natural gas (LNG) assets in Canada, Peru, and Trinidad
put up for sale by Spain's Repsol.
The recent spate of expenditure could, however, hinder
ONGC's immediate efforts to make large-size deals such as the
one for Conoco's Canada assets, analysts said.
"Because ONGC has just announced the Kashagan deal, it (the
Canada deal) may be too much for them to take on quickly. There
may not be such big deals for next 6-8 months," said Dayanand
Mittal, an oil and gas sector analyst at Mumbai's Ambit Capital.
"The IRR (internal rate of return) will be lower versus
conventional oil-and-gas assets since capital expenditure is
significantly higher," he added.