Analysts: ONGC looks for oil in Russia and Systema of the RF looks for cheap money in India

Systema AFC and ONGC can merge their oil assets. Yesterday they signed a framework agreement on the presupposing of the merging of shares in Bashneft and Russneft and Imperial Energy, a 100% branch of ONGC. Systema states that they can use other oil and gas assets for the merger but Russia will act as the major territory for cooperation. The companies are going to make concrete solutions within 12 months. Analysts value their integration plans differently. Most of them think that the integration is advantageous first of all for India. The analyst of the Fund for National Energy Safety K. Simonov tells that the Indians are interested in Russia strategically as energy demand rises in India too fast; they are ready to participate in any productive projects and the region is very prospective for them. The Indian company already operates in Russia holding a share in Sakhalin 1. Uralsib Capital analyst A. Kokin thinks that integration to System assets will give ONGC an opportunity to considerably increase production; now its annual output is 33 million tons and integration can rise it by 45%. Analysts think that Systema's interest in the assets integration is not so unambiguous. First of all they are interested in each other as partners in the Trebs and Titov deposits development; Bashneft can get the latter soon. The project can need investment of $5-6 billion. Bashneft does not name the funds source now but can attract partners to the project. UniCreditSecurities analyst A. Konchin says that ONGC could provide Systema access to cheap funding. In his opinion, the ideal variant would be a joint venture foundation with ONGC and Lukoil with granting of 20-25% of stocks to them. Bashneft gets in this case cheap money and access to Lukoil's infrastructure. Capital analyst V. Kryukov says that the companies could analyze either a JV foundation or ONGC's participation in the deposits development via a share in Bashneft. In future, after Bashneft and Russneft assets integration, ONGC can introduce Imperial Energy to the merged company's capital. Mr. Simonov thinks that the Indian asset is incomparable to Bashneft and Russneft. Imperial Energy produces 2 million tons a year and holds several assets in Tomsk region. Some analysts say that for Systema it would be much interesting to participate in traditional for it telecommunication projects in India. In exchange for this opportunity the company could make concessions in non-profile projects, oil sector for example. Translated by Nadezhda Poltoratskaya Source:

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