ONGC & Oil India Face Competition from Sinopec for 50% Share in Kenya's Oilfield22 May 2023 13:57
India's leading overseas oil company, ONGC Videsh, has partnered with Oil India (NS:OILI) to replace Indian Oil (NS:IOC) in the potential acquisition of a 50% stake in Tullow Oil Plc (LON:TLW)'s $3.4 billion oilfield project in Kenya, according to sources familiar with the matter. However, they now face fierce competition from Chinese energy giant Sinopec, which is capitalizing on delays by the Indian side to finalize the deal.
Initially, ONGC Videsh—the international arm of state-owned Oil and Natural Gas Corporation (NS:ONGC), sought to acquire half of the stakes held by Tullow, Africa Oil Corp., and TotalEnergies SE in Kenya's Lokichar oilfield. The board of OVL approved this move but wanted IOC involved; it had also expressed interest in participating.
For months, negotiations between OVL-IOC took place regarding their share in the project. Unfortunately, due to financial strains resulting from losses on fuel sales caused IOC to have second thoughts about moving forward with this transaction.
Sources revealed that during a visit by a Kenyan ministerial delegation at India Energy Week held earlier this year in Bengaluru, where officials confirmed IOC would not proceed—state-owned firm Oil India Ltd was announced as its replacement partner.
The prolonged delay opened up an opportunity for China Petroleum & Chemical Corporation (Sinopec), who are now sending feelers out towards Tullow and other partners involved within this venture.
Tullow, led by India-origin CEO Rahul Dhir, initially favored the Indian consortium due to similarities between Kenya's project and Barmer fields in Rajasthan. Approximately 70% of supply chain sourcing could have been done from India, providing significant synergy for both parties.
However, Chinese interest may disrupt these plans as Beijing holds substantial influence over African nations such as Kenya.
If successful in their negotiations, OVL-OIL would become joint operators of this venture alongside Tullow—currently holding a 50% stake—as well as Africa Oil Corp and TotalEnergies SE who each possess a 25% stake. The three companies were planning to sell half of their stakes to the Indians.
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