Friday, December 16 2005 10:56 Hrs (IST) - World Time -

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

Government sources said a CCEA meeting, chaired by Prime Minister Manmohan Singh, late last evening decided that ONGC 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 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 dollars.

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.