In a major loss of face to state-run Oil and Natural Gas Corp, the Cabinet Committee on Economic Affairs has shot down its proposal to acquire a 45 per cent stake in a Nigerian oil and gas field for close to $2-billion saying the deal was 'too risky.'

Government sources said a CCEA meeting, chaired by Prime Minister Manmohan Singh, late last evening decided that ONGC [Get Quote] Videsh Ltd, the overseas arm of ONGC, cannot be allowed to buy South Atlantic Petroleum's 45 per cent stake in the Akpo oil and gas field.

South Atlantic Petroleum is owned by former Nigerian Defence Minister Theophilus Danjuma and the CCEA felt dealing with him was 'too risky.'

"This is a major face loss for us," said a top executive of the company. This was for the first time ONGC had beat arch rivals Chinese state-owned firms to clinch the field that is estimated to hold 1.6 billion barrels of oil reserves.

Walking out after agreeing to buy the stake would mean loss of credibility as a serious player in the international market, he said.

In recent times, ONGC had lost to the Chinese, the race for getting a slice of fallen Russian oil major Yukos' main producing asset and acquisition of Canada's PetroKazakhstan (which has most of its operations in Kazakhstan) and EnCana's Ecuador assets.

Though it had teamed up with China National Petroleum Corp (CNPC) to bid for the Syrian assets of Petro-Canada, Akpo was the only case where it had managed to beat the Chinese.

ONGC was reckoned in the international market as the only serious competition to the Chinese prowl for overseas oil and gas properties but with the Government shooting down a key proposal it has lost considerable credibility in the market, said a merchant banker.

OVL had beat arch rivals CNOOC of China in race for South Atlantic Petroleum's 45 per cent stake in the Akpo oil and gas field, which is said to hold an estimated 1.6 billion barrels of oil reserves and a yet-to-be determined gas reserve portfolio.

South Atlantic Petroleum, owned by the ex Nigerian Defence Minister Theophilus Danjuma, is selling the stake in the field, which after 2008 will pump 225,000 barrels a day of sweet crude oil. Its development will cost OVL another $4 billion.

Total SA of France holds 24 per cent of the field that lies about 200-km off the coast of Port Harcourt. Brazil's Petroleo Brasileiro SA owns 16 per cent, while the remaining is with state-owned Nigeria National Petroleum Corp.

Total is the operator in the field.

The Akpo field was discovered in 2000, and is located 200-km offshore in water depths ranging from 1,100 to 1,700 meters. Energy consultancy Wood Mackenzie estimates Akpo has condensate reserves of over 600 million barrels and commercial natural gas reserves of 2.5 trillion cubic feet.

OIL plan okayed

The government has approved Oil India Limited's plan to form project specific special purpose vehicle (SPV) with Indian Oil Corporation [Get Quote] to undertake overseas projects including acquisition and exploration.

The Cabinet Committee on Economic Affairs said the Cabinet has approved of OIL forming a SPV with IOC and in the event IOC was not interested, with any other Navratna downstream oil PSU to undertake overseas projects.

The CCEA also mandated that proposals for all Exploration and Production projects would be jointly undertaken by OIL and Navratna downstream oil PSUs and would be brought before an empowered Committee of Secretaries (ECS), the same mechanism, as available to ONGC Videsh Limited (OVL).

OVL would be available so as to enable SPV undertake overseas projects for the acquisition of exploration and production of assets overseas. For this purpose, the ECS constituted for the purpose of OVL has also been authorised to consider similar proposals of this combine and give its recommendations to the CCEA, he said.

R&D in ocean tech gets nod

The government has cleared the acquisition of a technology services and demonstration vessel (TDV) and costs for its operations and maintenance during 2007-08, entailing a total of Rs 230.72 crore (Rs 2.307 billion), to be used for research and development in ocean technology services.

As per the revised estimates for the project, Rs 191 crore (Rs 1.91 billion) would be used during the Tenth Plan period and the balance Rs 39.72 crore (Rs 397.2 million) in the eleventh period, Finance Minister P Chidambaram said on Thursday night.

Newsbridge investment cleared

The government has cleared investments to the tune of $150 million (approximately Rs 687 crore) by Newsbridge India Investments, Mauritius, into Shriram Holdings (Madras) Pvt Ltd.

Finance Minister P Chidambaram told reporters on Thursday night that the Cabinet Committee on Economic Affairs approved Newsbridge India Investments' investment, through subscription and/or subsequent acquisition of up to 74 per cent equity shares of SHMPL.

The approval also included the consequent downstream investment by SHMPL in shares and warrants of each of Shriram Investments Ltd, Shriram Transport Finance Co Ltd and Shriram Overseas Finance Ltd.