State Shrugs Off ONGC Fears on Imperial Deal

The Federal Anti-Monopoly Service on Monday brushed aside concerns aired by ONGC that it had not yet received the necessary approval to purchase Imperial Energy.

The Britain-based oil explorer fell as much as 16 percent in London trading after ONGC said it had not yet received a formal confirmation that Imperial had been ruled nonstrategic. Imperial eventually recovered much of the losses, closing down almost 6 percent at 1,000 pence ($15.60).

ONGC Videsh, the company's overseas arm, offered 1,250 pence per share for Imperial Energy in August, in a deal worth $2.6 billion.

"On Friday, I said that the deal was approved, and it was," said Sergei Noskovich, a spokesman for the anti-monopoly service. "Nothing has changed here."

The service has said it cleared ONGC's bid on anti-monopoly grounds and that Imperial had been ruled a nonstrategic asset, eliminating the other major hurdle for foreign investment in Russia.

But a spokesman for ONGC said it had not received documents clearing it to invest in Imperial.

"The bureaucracy hasn't yet caught up with the decision making ... so we can't yet say that the first precondition has been passed," he said, referring to whether Imperial was considered strategic.

Sources close to both sides denied that ONGC Videsh had approached Imperial about cutting the bid price, which was made when oil was still trading at more than $120 per barrel, Reuters reported.

"They are not acting like they do not want to do the deal," one source familiar with the situation said.

Mumbai-based daily The Economic Times quoted a source in the Indian Cabinet as saying the government was "keen" to renegotiate the deal.

Imperial did not respond to repeated calls for comment.

But even with oil trading at roughly half what it was in August, ONGC is expected to go ahead with the purchase.

"It's a huge premium on current prices, but I suppose that ONGC will agree," said Mikhail Zanozin, an oil and gas analyst at UralSib, adding that India's state energy company had been seeking to buy oil production capacity in Russia for several years.

In 2006, ONGC bid on Udmurtneft, in which China's Sinopec eventually purchased a majority stake for $3.6 billion.