NEW DELHI (Reuters) - India's cabinet turned down Oil and Natural Gas Corp's (ONGC) bid for a stake in a Nigerian oilfield, as oil ministry officials said the strategy for buying foreign oil assets was under review.
But the state-run explorer got clearance for ``Project Sugar Loaf,'' an investment of up to $820 million in ExxonMobil Corp.'s (XOM.N) Brazilian subsidiary, if it makes a successful bid, Finance Minister Palaniappan Chidambaram said on Friday.
ONGC (ONGC.BO), India's most valuable listed company, had won an auction for a stake in Nigeria's yet-to-be developed Akpo oil and gas field, offering between $1 billion and $2 billion, a source with knowledge of the situation told Reuters this month.
``It has not been approved,'' Chidambaram told reporters.
An oil ministry source said ONGC's proposal was deemed ''very risky'' and the cabinet rejected the proposal, although one television station reported that the proposal was only put on hold.
ONGC shares were largely flat in a strong Mumbai market (.BSESN).
ONGC's spokesman declined to comment, but another official said the cabinet's decision had embarrassed the company.
``We had consulted the government at every stage. We were expecting an approval. It is a huge embarrassment,'' said the ONGC official, who did not want to be named.
The Press Trust of India had reported that ONGC beat arch-rival CNOOC of China in the race for the Akpo field.
ONGC already has interests in Sudan, Libya, Myanmar, Iran, Iraq, Syria, Russia and Ivory Coast, yet analysts also voiced concern about its bid in Nigeria and said ONGC had not disclosed any facts about it to shareholders.
``Nigeria is a very risky country to invest (in), especially for state-owned companies like ONGC,'' said Jaspreet Singh, a senior analyst with Prabhudas Lilladher.
PROJECT SUGAR LOAF
On Brazil, the government said in a statement the proposed purchase would include paying $330 million to buy ExxonMobil's Brazilian subsidiary and $490 million as cash calls for its share of project cost, appraisal and further exploration.
ExxonMobil holds interests in two offshore blocks in Brazil's prolific Campos Basin, with a 30 percent stake in block BC-10, in which an oil discovery has been made with possible reserves of 400 million barrels.
The government aims to ensure ONGC gets an average internal rate of return of at least 10 percent on the investment, it said.
Exxon's partners in BC-10 are Royal Dutch Shell(RDSb.L) and Brazilian state company Petrobras (PETR4.SA). Block operator Shell aimed to declare it commercially viable this year.
India is keen to buy more oil assets abroad to ensure steady supply as its growing economy consumes increasingly more energy.
The cabinet also decided on Friday to allow a smaller state-run firm, Oil India Ltd., to bid abroad along with the country's largest refiner, Indian Oil Corp. Ltd. (IOC.BO).
Oil India will also be allowed to bid for foreign petroleum assets along with refiners such as Hindustan Petroleum Corp. Ltd. (HPCL.BO) and Bharat Petroleum Corp. Ltd. (BPCL.BO).
But a top oil ministry official, who did not want to be named, said the government was reviewing the energy-hungry country's strategy of buying stakes in foreign oilfields.
``The whole issue needs to be reviewed in light of recent developments. Maybe we should go for exploration and production abroad rather than bidding for discovered fields,'' said the official, who did not want to be identified.
``Proposals put before us are very non-transparent in nature and have extraordinary financial risk,'' he said.